Work detail

Impact of Institutions on Cross-Border Price Dispersion

Author: Mgr. Jiří Schwarz
Year: 2009 - summer
Leaders: prof. Ing. Štěpán Jurajda Ph.D.
Work type: EEI & EP
Language: English
Pages: 62
Awards and prizes: M.A. with distinction from the Dean of the Faculty of Social Sciences for an excellent state-final examination performance and for an extraordinarily good masters diploma thesis.
Abstract: This thesis, building on existing studies on border effect, analyzes price dispersion among cities in the European region over the last twenty years (1990-2009). An extensive overview of the literature reveals that the authors completely neglect the entrepreneurial aspect of the arbitrage process, even though arbitrage is the main power behind the law of one price. Once we understand arbitrage as productive entrepreneurial activity, institutional quality should be one of determinants of arbitrage attractiveness and should, therefore, influence the price dispersion. To test this hypothesis I express the quality of institutions as one of the factors influencing total costs of arbitrage, together with population density in cities used as a proxy for competition intensity, and distance. The regression analysis proves that all three variables explain a part of observed price dispersion – the higher is the density and the better are the institutions, the lower is the predicted dispersion. This result can also be viewed as a small contribution to the emerging literature empirically testing the theory of productive and unproductive entrepreneurship.
Downloadable: Diploma Thesis of Schwarz


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