Price dispersion is a number that describes how wide the prices of various products are spread. A high number means a wide spread, while a low number means little price dispersion. (For those interested in statistics it is the standard deviation of the price of the product we estimate.)

A high spread may indicate a well-functioning competitive position, although it also can be the result of a company exploiting its dominant position in the market, and deliberately putting themselves at a very low price level. A small spread, on the other hand, can be an indication of a deteriorating competitive position, perhaps even caused by illegal means like a cartel or price fixing. It may also be due to intense competition and low margins, which lead to similar pricing models, or that most companies simply opted to follow the recommended retail price.

The price dispersion information cannot alone reveal the underlying cause, but along with other information it becomes a useful tool, or simply interesting information worth noting.

We set the price dispersion information at a number of different levels:

• By product
• By product category
• By manufacturer