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Prices and Price Dispersion on the Web: Evidence from the Online Book Industry

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Author Info
Clay, Karen
Krishnan, Ramayya
Wolff, Eric

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Abstract

Using data collected between August, 1999, and January, 2000, covering 399 books, we examine pricing by thirty-two online United States-based bookstores. At the aggregate level, we find that both advertising and competitive structure had the predicted effects. More competition led to lower prices and to lower price dispersion. Holding competitive structure constant, more widely advertised items also had lower prices. At the firm level, we observe considerable heterogeneity in behavior. Firms had differentiated (or attempted to differentiate) on dimensions such as brand, price, and selection. Copyright 2001 by Blackwell Publishing Ltd

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Article provided by Blackwell Publishing in its journal Journal of Industrial Economics.

Volume (Year): 49 (2001)
Issue (Month): 4 (December)
Pages: 521-39
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Handle: RePEc:bla:jindec:v:49:y:2001:i:4:p:521-39

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Wilde, Louis L & Schwartz, Alan, 1979. "Equilibrium Comparison Shopping," Review of Economic Studies, Blackwell Publishing, vol. 46(3), pages 543-53, July. [Downloadable!] (restricted)
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  2. Benabou Roland, 1993. "Search Market Equilibrium, Bilateral Heterogeneity, and Repeat Purchases," Journal of Economic Theory, Elsevier, vol. 60(1), pages 140-158, June. [Downloadable!] (restricted)
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  3. Jeffrey Milyo & Joel Waldfogel, 1999. "The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart," American Economic Review, American Economic Association, vol. 89(5), pages 1081-1096, December. [Downloadable!] (restricted)
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  4. Lutkepohl, Helmut, 1993. "The," Empirical Economics, Springer, vol. 18(4), pages 729-43.
  5. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July. [Downloadable!] (restricted)
  6. Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers 94, Board of Governors of the Federal Reserve System (U.S.).
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  7. Glazer, Amihai, 1981. "Advertising, Information, and Prices-A Case Study," Economic Inquiry, Oxford University Press, vol. 19(4), pages 661-71, October.
  8. D. Grant Devine & Bruce W. Marion, 1979. "The Influence of Consumer Price Information on Retail Pricing and Consumer Behavior," Framed Field Experiments 0017, The Field Experiments Website. [Downloadable!]
  9. Rauh, Michael T., 1997. "A Model of Temporary Search Market Equilibrium," Journal of Economic Theory, Elsevier, vol. 77(1), pages 128-153, November. [Downloadable!] (restricted)
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  10. Arnold, Michael A, 2000. "Costly Search, Capacity Constraints, and Bertrand Equilibrium Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 117-31, February.
  11. Salop, S & Stiglitz, J E, 1982. "The Theory of Sales: A Simple Model of Equilibrium Price Dispersion with Identical Agents," American Economic Review, American Economic Association, vol. 72(5), pages 1121-30, December. [Downloadable!] (restricted)
  12. Benham, Lee, 1972. "The Effect of Advertising on the Price of Eyeglasses," Journal of Law & Economics, University of Chicago Press, vol. 15(2), pages 337-52, October.
  13. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August. [Downloadable!] (restricted)
  14. Feldman, Roger D & Begun, James W, 1980. "Does Advertising of Prices Reduce the Mean and Variance of Prices?," Economic Inquiry, Oxford University Press, vol. 18(3), pages 487-92, July.
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