Price dispersion linked to inflation, impacting consumer costs and choices.
The study looked at how prices of goods in Germany changed during a period of low inflation in 1995. They found that when prices of products went up, the differences in prices between products also increased. However, the speed at which prices changed did not affect how much prices varied. This suggests that when inflation is low, only the differences in prices between products are linked to price changes. But as inflation goes up, both the differences in prices and how much prices vary are affected. In times of very high inflation, the differences in prices between products don't seem to follow a pattern. This shows that the differences in prices are mainly due to how easily prices can be changed, while how much prices vary is more about how hard it is to find price information.