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| Author: | Asplund, M. Friberg, R. |
| Title: | The Law of One Price in Scandinavian Duty-Free Stores |
| Journal: | American Economic Review
2001 : SEP, VOL. 91:4, p. 1072-1083 |
| Index terms: | PRICES PRICE POLICY SCANDINAVIA SHOPS |
| Language: | eng |
| Abstract: | The data for this article are taken from three Scandinavian duty-free outlets, where each product (at the same location) has price tags in at least two currencies. Hence, a consumer has the option to choose between several prices for the same identical good. In such a setting there is a strong prior that the law of one price (LOP hereafter) holds well. Based on standard tests, the authors reject LOP at all duty-free outlets. Given that LOP does not hold here, it is less surprising that many previous studies have found that prices of similar products at different locations differ significantly. The main conclusion of the paper is that in this "natural experiment," LOP remains a useful guide to the behavior of relative prices. |
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