Price Dispersion on the Internet: Good Firms and Bad Firms

Price Dispersion on the Internet: Good Firms and Bad Firms Internet firms charge a wide range of prices for homogeneous products, and high-priced firms remain high-priced and low-priced firms remain low-priced over long periods. One explanation is that high-price firms are charging a premium for superior service. An alternative, price-dispersion explanation is that firms vary the prices for informed and uniformed consumers (Salop and Stiglitz, 1977) or serious shoppers and others (Wilde and Schwartz, 1979). The pricing pattern for a digital camera and a flatbed scanner is consistent with the price-dispersion model and inconsistent with the service-premium hypothesis. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Price Dispersion on the Internet: Good Firms and Bad Firms

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Publisher
Kluwer Academic Publishers
Copyright
Copyright © 2002 by Kluwer Academic Publishers
Subject
Economics; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1023/A:1020415304514
Publisher site
See Article on Publisher Site

Abstract

Internet firms charge a wide range of prices for homogeneous products, and high-priced firms remain high-priced and low-priced firms remain low-priced over long periods. One explanation is that high-price firms are charging a premium for superior service. An alternative, price-dispersion explanation is that firms vary the prices for informed and uniformed consumers (Salop and Stiglitz, 1977) or serious shoppers and others (Wilde and Schwartz, 1979). The pricing pattern for a digital camera and a flatbed scanner is consistent with the price-dispersion model and inconsistent with the service-premium hypothesis.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Oct 13, 2004

References

  • Costly Search, Capacity Constraints, and Bertrand Equilibrium Price Dispersion
    Arnold, M. A.

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