“Are Online and Offline Prices Similar? Evidence from Large Multi-Channel Retailers“

Online prices are increasingly used for measurement and research applications, yet little is known about their relation to prices in physical stores, where most retail transactions occur. I conduct the first large-scale comparison of prices simultaneously collected from the websites and physical stores of 56 large multi-channel retailers in 10 countries. I find that price levels are identical about 72 percent of the time. Price changes are not synchronized but have similar frequencies and average sizes. These results have implications for national statistical offices, researchers using online data, and anyone interested in the effect of the Internet on retail prices.

“ The Billion Prices Project: Using Online Prices for Inflation Measurement and Research”“

New data-gathering techniques, often referred to as “Big Data” have the potential to improve statistics and empirical research in economics. In this paper we describe our work with online data at the Billion Prices Project at MIT and discuss key lessons for both inflation measurement and some fundamental research questions in macro and international economics. In particular, we show how online prices can be used to construct daily price indexes in multiple countries and to avoid measurement biases that distort evidence of price stickiness and international relative prices. We emphasize how Big Data technologies are providing macro and international economists with opportunities to stop treating the data as given and to get directly involved with data collection.

“Inflation Expectations, Learning and Supermarket Prices“

Information frictions play a central role in the formation of household inflation expecta- tions, but there is no consensus about their origins. We address this question with novel evidence from survey experiments. We document two main findings. First, individuals in lower-inflation contexts have significantly weaker priors about the inflation rate. This find- ing suggests that rational inattention may be an important source of information frictions. Second, cognitive limitations also appear to be a source of information frictions: even when information about inflation statistics is made readily available, individuals still place a sig- nificant weight on less accurate sources of information, such as their memories of the price changes of the supermarket products they purchase. We discuss the implications of these findings for macroeconomic models and policy-making.