Price Transparency, Media, and Informative Advertising

Itai Ater*, Oren Rigbi

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

Abstract

We study the effects of a price transparency regulation in Israeli supermarkets. Using price data collected before and after the regulation and a difference-in-difference research design, we show that price levels and price dispersion declined significantly after the regulation. Chains also began setting identical prices in all stores. We use Robert and Stahl (1993) to interpret our findings, showing that low-priced chains extensively used price advertising after prices became transparent. These chains referenced price-comparison surveys conducted by the media to induce credibility for ads. Our findings highlight the importance of price transparency and the procompetitive role of informative advertising.

Original languageEnglish
Pages (from-to)1-29
Number of pages29
JournalAmerican Economic Journal: Microeconomics
Volume15
Issue number1
DOIs
StatePublished - 2023

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