Price divergence is readily apparent to anyone who shops. Travelers from
Manchester to London, or from Chicago to Paris, are hit by sticker
shock. Products ranging from London Fog raincoats to Viagra are
available over the Internet at half their retail store prices. Common
experience tells us that prices for identical products differ between
countries, between cities, even between neighboring shops. On the other
hand, common experience also tells us that open markets and greater
competition will force a degree of price convergence, if not identical
prices.
This monograph presents speculative calculations that illustrate
potential benefits from price convergence between countries. The authors
take a fresh look at global economic integration by examining existing
price divergence, and possible price convergence, across a range of
consumer goods and then calculate the potential benefits of price
convergence on a country-by-country basis and for the world as a whole.
This study examines the potential benefits from price convergence
resulting from more competition and market integration, not perfect
competition and market integration. The authors calculate these benefits
assuming that the world economy can attain the same degree of
competition and market integration--and hence price convergence--as
exists within the United States.