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… 
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