Arghyrou, Michael Georgiou, Gregoriou, Andros and Pourpourides, Panayiotis 2011. Risk aversion, exchange-rate uncertainty, and the law of one price: insights from the market for online air-travel tickets. Canadian Journal of Economics/Revue canadienne d'économique 44 (3) , pp. 880-906. 10.1111/j.1540-5982.2011.01659.x |
Official URL: http://onlinelibrary.wiley.com/doi/10.1111/j.1540-...
Abstract
We argue that risk aversion driven by exchange-rate uncertainty causes a wedge between the domestic and foreign prices of a homogeneous good. We test our hypothesis using a unique micro-data set from a market with minimum imperfections. The empirical findings validate our hypothesis, as accounting for exchange-rate uncertainty we are able to explain a significant proportion of deviations from the law of one price. Overall, our analysis suggests the possibility of a new solution to the purchasing power parity puzzles.
Item Type: | Article |
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Date Type: | Publication |
Status: | Published |
Schools: | Business (Including Economics) |
Subjects: | B Philosophy. Psychology. Religion > BF Psychology H Social Sciences > HB Economic Theory H Social Sciences > HF Commerce |
Publisher: | Wiley-Blackwell |
ISSN: | 1540-5982 |
Last Modified: | 04 Jun 2017 04:27 |
URI: | http://orca.cf.ac.uk/id/eprint/39452 |
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