Price dynamics and market segmentation

- We investigate LOP in three different types of markets.
- Using TAR models we show that the average half-life estimate is about 11 weeks.
- We also show that the mean threshold is 3.84%.
- The threshold estimates differ between markets but the half-life estimates do not.
- We argue that both menu and search costs are responsible for these results.

Scrutinizing hundreds of TAR models, we examine the persistence of price dynamics across market segments. Using a unique dataset of monthly actual product prices of 47 items collected from three different market segments in Istanbul over 1993:01-2008:12, we provide evidence that the extent of price persistence differs across market segments while the half-life estimates do not.