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The Evolution of Price Dispersion in China's Passenger Car Markets


  • We are grateful to Zhigang Tao, Yi Lu and two anonymous referees for their valuable comments and suggestions. This research is supported by “The University of Hong Kong- Fudan University IMBA Joint Research Fund” (JRF11_0601). Jiangyong Lu acknowledges research supports from National Science Foundation of China (#71172020; #71132002).


This research identified the rising price dispersion of passenger cars in Chinese cities during the period from 2004 to 2006. The sources of the price differentials were then further explored. The theoretical and empirical analyses suggest that the income effect (as reflected by income differentials across Chinese cities) and the competition effect (as reflected by car supply differentials across Chinese cities) largely account for regional automobile price differentials across China.