The law of one price: intranational evidence for Canada

This study investigates the behaviour of intranational prices for 45 specific consumer goods across 25 Canadian cities. It finds positive roles for distance and provincial borders in intercity price disparities. While sizable, the provincial border effect is an order of magnitude smaller than the estimates for the Canada-U.S. border. A majority of the intercity relative price series are stationary around small mean values, indicating that long-run price differences are close to zero. The intercity prices converge at rates considerably faster than the consensus estimates for international prices. In fact, half-lives for intercity price deviations average well under a year.