Law of one price

How large are price differences of identical goods across countries?

Do border induce price gaps? How large are they?

Do borders induce price gaps?

  • Yes, they do. Prices of most identical goods systematically change at the border.
  • 75 % of all border estimates are significant.

How large are price gaps at the border?

  • Most price gaps are in the range of ± 40%
  • Median pridce gaps are between 15% and 20%.
Price gap of a selected good at the border
test
Taken from: Beck, Kotz and Zabelina (2020).

How we measure border price gaps

Data

Price gap of a selected good at the border
Taken from: Beck, Kotz and Zabelina (2020).
  • Scanner price data from Belgium, Germany and Netherlands.

Approach

Use regression discontinuity approach to identify the effect of borders on prices: 
 
Price gap of a selected good at the border
Taken from: Beck, Kotz and Zabelina (2020).