We leverage a comprehensive dataset of electronic invoices from Chilean firms to document new facts on price dispersion across buyers of manufactured intermediate goods. Over half of firm-to-firm manufacturing sales are accounted for by products that are purchased by more than one buyer in the same month. Price dispersion across buyers is pervasive, with a price range across buyers of 46 percentage points for the average product. Price gaps are highly persistent over time and strongly correlated across different products purchased by the same buyer. While price disparities comove with observable characteristics of buyer-seller pairs—such as size of the buyer and the transaction—these factors account for a small portion of the overall variation in price gaps. We use a workhorse model of production networks to quantify the productivity gains from eliminating observed dispersion in prices across buyers of the same product, under the assumption that this dispersion is driven by buyer-product specific markups. The increase in aggregate productivity (normalized by the sales share of treated multi-buyer firms) ranges from 2 to 7 percent, depending on the calibration of elasticities of substitution. The gains from eliminating markup dispersion across buyers are as large as those of eliminating markup dispersion across products.
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- Acknowledgements & Disclosure
- The views expressed are those of the authors and do not necessarily represent the views of the Central Bank of Chile, its board members, or the National Bureau of Economic Research.
- DOI
- https://doi.org/10.3386/w33128
- Pages
- 51
- Published in
- United States of America
Table of Contents
- Introduction 3
- Data 7
- Data description 7
- Summary statistics 9
- Empirical findings 10
- Price dispersion across buyers 11
- Robustness 14
- Price dispersion and inflation 14
- Which products have more dispersed prices? 14
- Price gaps and differences in costs of supplying different buyers 16
- Shipping costs 16
- Payment terms 17
- Correlation of price gaps over time 19
- What drives variation in price gaps? 20
- Price gaps and buyer size 20
- Price gaps and buyer-seller relations 21
- Price gaps and quantity discounts 23
- Price-quantity menus 23
- Taking stock 25
- Model 26
- System in changes 28
- Analytic results under simplified network 29
- Quantitative results 30
- Mapping the model to data 30
- Sample of products 30
- Measuring dispersion in markups across buyers 30
- Parameterization 31
- Eliminating markup dispersion across buyers 33
- Eliminating markup dispersion across products and buyers 34
- Conclusion 36
- Additional tables and figures 39
- Data 43
- Additional datasets 43
- Data cleaning 43
- Model derivations 44
- Equilibrium characterization 44
- Derivation of Equation (18) 46
- Calibration details 48
- Apportioning firm-level inputs to products 48
- Calibrating value added shares 48
- Solution Algorithm 49
