International Price Comparisons and the Law of One Price : A case study of pricing on a price comparison website

Abstract: The Law of One Price (LOP) is one of the most frequently tested economic laws. In simple terms the LOP states that once price is converted to a common currency, the same goods should sell for the same price in different countries. We have extracted the data from the price comparison website PriceSpy over seven different countries to analyze the trend in price dispersion. The methodologies we have used were regression for comparison of three different country pairs along with descriptive statistics to analyze the price dispersion trends related to the exchange rate. We concluded that there are many factors to make the fluctuation in prices and deny the LOP.