Did the Euro Foster Online Price Competition? Evidence from an International Price Comparison Site

We study the impact of the Euro on prices charged by online retailers within the European Union. Our data span the period before and after the Euro was introduced, cover a variety of products, and include countries inside and outside of the Eurozone. After controlling for cost, demand, and market structure effects, we show that the pure Euro changeover effect is to raise average prices in the Eurozone by 3 % and average minimum prices by 7%. Finally, we develop a model of online pricing in the context of currency unions and show that these price patterns are broadly consistent with those of clearinghouse models. (JEL D400, D830, F150, L130, M370) Copyright 2006, Oxford University Press.