Price dispersion linked to inflation, impacting consumer choices and market dynamics.
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 or down, the range of prices for those products also changed. However, the speed at which prices changed did not affect how much prices varied. This means that when prices go up or down, the difference in prices between products changes, but not how much prices vary overall. This suggests that when inflation is low, only the range of prices changes with individual price changes. But as inflation goes up, both the range and the overall variability of prices are affected.