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Follow the leader: price change timing in Internet-based selling

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Author Info
Robert J. Kauffman (Arizona State University, Tempe, AZ, USA)
Charles A. Wood (Notre Dame University, Notre Dame, IN, USA)
Abstract

Internet technologies should lessen information asymmetry, prompting competitive price reactions, but this does not seem to be happening in Internet-based selling. We study empirical regularities of price change timing for music CD vendors and booksellers to assess several theoretical explanations. Our sample includes 123, 680 daily prices for 169 products and 53 firms. Bertrand competition is insufficient to explain our observation that sellers do not shift prices this way. Tacitly collusive responses to competitors' price changes are observed rather than price changes solely in response to demand or cost shifts as would be expected with Bertrand competition. We find evidence of business rules for strategic pricing associated with tacitly collusive pricing and Edgeworth competition. Copyright © 2007 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/mde.1375
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Publisher Info
Article provided by John Wiley & Sons, Ltd. in its journal Managerial and Decision Economics.

Volume (Year): 28 (2007)
Issue (Month): 7 ()
Pages: 679-700
Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Handle: RePEc:wly:mgtdec:v:28:y:2007:i:7:p:679-700

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/7976

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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.:
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  5. Sims, Christopher A, 1980. "Macroeconomics and Reality," Econometrica, Econometric Society, vol. 48(1), pages 1-48, January. [Downloadable!] (restricted)
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  7. Daniel Levy & Shantanu Dutta & Mark Bergen, 2004. "Heterogeneity in Price Rigidity: Evidence from a Case Study Using Micro-Level Data," Macroeconomics 0402021, EconWPA. [Downloadable!]
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  8. A. Arize & J. Malindretos & Z. Obi, 2002. "Long- and short-term interest rates in 19 countries: Tests of cointegration and parameter instability," Atlantic Economic Journal, International Atlantic Economic Society, vol. 30(2), pages 105-120, June. [Downloadable!] (restricted)
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  1. Daniel Levy, 2007. "Price rigidity and flexibility: new empirical evidence," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 639-647. [Downloadable!]
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  2. Rajesh Chakrabarti & Barry Scholnick, 2007. "The mechanics of price adjustment: new evidence on the (un)importance of menu costs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(7), pages 657-668. [Downloadable!]
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