Amazon Effect: researcher claims web giant’s low prices keep inflation in check

Retailers adjusting prices more frequently and uniformly across locations should react faster to economic shocks, shows a recent study

Competition between Amazon and traditional retailers is causing prices to become more uniform

MIT Sloan professor Roberto Rigobon and Harvard University professor Alberto Cavallo are the co-founders of the Billion Prices Project. The project collects prices — it has around 15 million prices today — provided by online retailers around the world. The public data is used to conduct research in macroeconomics and international economics. The professors say

A new study argues that the growth of Amazon and other online retailers has kept inflation and prices low in the U.S. Will Israel and other Middle Eastern economies follow suit and allow e-commerce to take off?

Online competition increases the frequency and uniformity of price changes at brick-and-mortar retailers.  

Alberto Cavallo, who works as an associate professor in the Harvard said that in the last 10 years, the competition in the online retailing has increased the price change frequency along with the uniform pricing degree across all the location.

Last week, the Federal Reserve Bank of Kansas City held its much anticipated annual central banking conference in Jackson Hole. This year’s topic “Changing Market Structures and Implications for Monetary Policy” garnered even more attention than usual.

Harvard Business School found that the average duration for regular price changes fell to 3.65 months in 2014 to 2017 from 6.7 months in 2008 to 2010. It also investigated how prices at Amazon, Walmart, Best Buy and Safeway vary across geographic locations. Harvard’s Alberto Cavallo concludes that the paper’s most important finding is that