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The impact of cross sectional aggregation over individual retail stores on the estimation and testing of vertical price transmission is investigated using a unique data set of individual retail prices. Systematic differences between the results of estimations using aggregated data on the one hand, and disaggregated data on the other, are discussed theoretically and confirmed empirically. The results suggest that results based on aggregated data generally cannot be used to draw conclusions about price transmission behaviour at the level of the individual data that underlies aggregates.
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Cramon‐Taubadel et al. (2003) studied this question.
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