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.