What is the Billion Prices Project?

The Billion Prices Project is an academic initiative that collects daily price data from hundreds of retailers around the world to conduct economic research about pricing behavior, daily inflation, pass-through, sales behavior, and green markups.

By late-2009, we expect to download nearly 40 million prices a day – hence, a billion a month. Our goal is to have a reliable picture of over 60 percent of CPI categories retailed in each country.

How did we start?

We started in October 2007 collecting data from supermarkets in four Latin American countries. In early 2008, we expanded our scope to cover more product categories and countries around the world.

Today, we have data from over 50 countries, in five different categories: supermarkets, electronics, apparel, furniture, and real estate. On a smaller scale, we are also collecting data on medicines, cosmetics, hardware products, toys, and books. We typically collect product prices, ids, descriptions, package sizes, and detailed indicators, including whether the item is new, on sale, or has government imposed price controls.

What are the BPP’s guiding research questions?

Our original objective was to study price stickiness, food inflation, and pass-through across Latin American countries. Over time, we expanded the research questions to several areas in Macroenomics and IO:

• Pricing Behavior:  What drives price stickiness around the world? How much can be explained by current inflation, and inflation histories? How much by competition and industries’ structure? Are prices synchronized? How strong are strategic complementarities?
• Asset Prices, Inflation, and Real Exchange Rate: What relationship exists between asset and retail prices? We are constructing aggregate inflation indexes in each of the sectors and countries for which we have data. We want to study the behavior of these aggregate prices and their relationship with other financial indicators. We also plan to publish inflation rates and real exchange rates at daily frequencies.
• Pass Through: How much do prices adjust internally when the exchange rate, or the international price of commodities change?
• Sales Behavior:  What role do sales play in pricing strategies? Are they affected by macro shocks? Are they used for price discrimination? We have daily information on sales and price controls in many countries. Sales tend to last only a few days in most retailers, so daily data can provide a much better characterization of sales and their effects on pricing behaviors than other data.
• Green Markups:  What premium is paid in stores for “green” or “organic” products? Since we have data from multinational retailers, we can compute premium differences -for exactly the same items- in different places.