Price dispersion across countries and the heterogeneous impacts of income differences

- I use online prices across countries to analyze the deviations from Law of One Price (LOP).
- The deviations from LOP are relatively smaller for higher-priced products.
- Income difference across countries is one reason for the price dispersions.
- The impacts of income difference on price dispersions are smaller for higher-priced products.

Using price information about thousands of identical products sold across over 70 countries, I show that the deviations from Law of One Price (LOP) are substantial, and relatively smaller for higher-priced products. In addition, I find that income difference across countries is one reason for the price dispersions, and its impact is smaller for higher-priced products.