PRICE DISPERSION IN THE SMALL AND IN THE LARGE: EVIDENCE FROM AN INTERNET PRICE COMPARISON SITE

PRICE DISPERSION IN THE SMALL AND IN THE LARGE: EVIDENCE FROM AN INTERNET PRICE COMPARISON SITE This paper examines four million daily price observations for more than 1,000 consumer electronics products on the price comparison site http://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 23 per cent when two firms list prices, and falls to 3.5 per cent in markets where 17 firms list prices. These empirical results are an implication of a general ‘clearinghouse’ model of equilibrium price dispersion. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png The Journal of Industrial Economics Wiley

PRICE DISPERSION IN THE SMALL AND IN THE LARGE: EVIDENCE FROM AN INTERNET PRICE COMPARISON SITE

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Publisher
Wiley
Copyright
Copyright © 2004 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0022-1821
eISSN
1467-6451
D.O.I.
10.1111/j.0022-1821.2004.00236.x
Publisher site
See Article on Publisher Site

Abstract

This paper examines four million daily price observations for more than 1,000 consumer electronics products on the price comparison site http://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 23 per cent when two firms list prices, and falls to 3.5 per cent in markets where 17 firms list prices. These empirical results are an implication of a general ‘clearinghouse’ model of equilibrium price dispersion.

Journal

The Journal of Industrial EconomicsWiley

Published: Dec 1, 2004

References

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