Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site

@article{Morgan2004PriceDI,
  title={Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site},
  author={John Morgan and Michael R. Baye and Patrick A. Scholten},
  journal={IO: Theory},
  year={2004}
}
This paper examines 4 million daily price observations for over 1000 consumer electronics products on the price comparison site Shopper.com. We find little support for the notion that prices on the Internet are converging to the “law of one price.” In addition, observed levels of price dispersion vary systematically with the number of firms listing prices. The difference between the two lowest prices (the “gap”) averages 22 percent when two firms list prices, and falls to 3.5 percent in markets… 
View on SSRN
kelley.iu.edu
525 Citations
Highly Influential Citations
55
Background Citations
210
Methods Citations
37
Results Citations
28

525 Citations

Citation Type

Citation Type

Persistent Price Dispersion in Online Markets
Using data from one of the Internet’s leading price comparison sites for consumer electronics products, we present evidence for the persistence of price dispersion for 36 homogeneous products. The…
Do Internet Converge Prices to the 'Law of One Price'? Evidence from Transaction Data for Airline Tickets
Internet presumably reduces search cost driving price to the competitive level. Evidence from empirical research quantifying dispersion in the electronic based markets has yield mixed results. More…
An Empirical Study of Price Dispersion in Homogenous Goods Markets
This paper presents the results of an empirical study of price dispersion in homogeneous goods markets. Modern economic theory suggests that inevitable asymmetries of information in markets lead to…
Are Internet Prices Sticky?
This paper studies the behaviour of Internet prices. It compares price rigidities on the Internet and in traditional brick-and-mortar stores and provides a cross-country perspective. The data set…
Temporal price dispersion: Evidence from an online consumer electronics market
Economic theory indicates that e-retailers competing at price comparison sites, such as Shopper.com, must charge prices that cannot be systematically predicted by their rivals. Consistent with…
Information and Price Dispersion on Net
Internet firms charge a wide range of prices for nearly homogeneous products and price dispersion vary significantly across markets. This study is an attempt to explain different levels of price…
Price Discount and Price Dispersion in Online Market: Do More Firms Still Lead to More Competition?
TLDR
A non-monotonic relationship between the number of firms and prices in online book markets is found and a substantial decrease in posted prices is observed when the market moves from a monopoly to duopoly.
Using Transaction Prices to Re-Examine Price Dispersion in Electronic Markets
TLDR
It is found that price dispersion in the electronic market is as low as 0.22%, which is substantially less than that reported in the existing literature and suggests that in some electronic markets the “law of one price” can prevail when the authors consider transaction prices, instead of posted prices.
PRICE AND PRICE DISPERSION ON THE WEB: EVIDENCE FROM THE ONLINE BOOK INDUSTRY OF TAIWAN
We study how the levels of market price and price dispersion are associated with consumersʼ search costs and the level of competitiveness in the online market using data collected from the online…
The Nature of Sales in Online Markets: Asymmetric Consumer Information or Benefits to Bulk Shopping?
Price dispersion - firms charging different prices for the same product - is widely observed in both online and traditional offline markets. While most price dispersion is explained by stylized…
...
...

References

SHOWING 1-10 OF 37 REFERENCES
Persistent Price Dispersion in Online Markets
Using data from one of the Internet’s leading price comparison sites for consumer electronics products, we present evidence for the persistence of price dispersion for 36 homogeneous products. The…
Pricing, Consumer Search and the Size of Internet Markets
Despite the mixed empirical evidence, many economists stillhold to the view that Internet will promote competition betweenfirms,thereby lowering prices and increasing economic welfare. This…
Frictionless Commerce? A Comparison of Internet and Conventional Retailers
There have been many claims that the Internet represents a new "frictionless market." Our research empirically analyzes the characteristics of the Internet as a channel for two categories of…
A Simple Model of Equilibrium Price Dispersion
This paper demonstrates that price dispersion can exist even within the context of a very simple model. Identical buyers with elastic demand curves sample sequentially from a known price…
Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets
We examine the equilibrium interaction between a market for price information (controlled by a gatekeeper) and the homogenous product market it serves. The gatekeeper charges fees to firms that…
Equilibrium Price Dispersion in Retail Markets for Prescription Drugs
This study seeks to establish the empirical importance of price dispersion due to costly consumer search by examining retail prices for prescription drugs. Posted prices in two geographically…
Strategic advertising and pricing in e-commerce
Understanding Digital Markets: Review and Assessment
As the Internet develops into a robust channel for commerce, it will be important to understand the characteristics of electronic markets. Businesses, consumers, government regulators, and academic…
Equilibrium Price Dispersion with Sequential Search.
Diamond (1971) showed that in a market where consumers search sequentially and have strictly positive search costs the unique price equilibrium is where all firms charge the monopoly price. This…
Oligopolistic Pricing with Sequential Consumer Search
N identical stores compete by choosing prices for a homogeneous good with constant marginal costs. Consumers search sequentially with perfect recall for the lowest price. One class of consumers,…
...
...