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Reputation, Location and Prices in Chinese Electronic Commerce Markets

Author

Listed:
  • Dongmei Zhao
  • Scott J.Savage
  • Yongmin Chen

    (College of Economics and Management, China Agricultural University)

Abstract

While it is easier to obtain price information online, electronic commerce (e-commerce) may exacerbate information asymmetry about product quality, since the buyer cannot physically inspect the product before purchase. This suggests seller reputation may play a more important role in the online market. As a transition economy, where markets are less developed and state-owned enterprises still play a substantial role, China offers an interesting opportunity to investigate the price effect of seller reputation from a new angle. Using data for 535 identical product items, we find that ownership structure appears to convey an important signal about reputation. Government-owned online retailers (e-tailers) leverage their reputation established in traditional markets into a eleven percent price premium in e-commerce markets. E-tailers with foreign affiliations or without a physical store must discount prices. Results suggest that distance and the e-tailer¡¯s location choice continue to be relevant in e-commerce markets.

Suggested Citation

  • Dongmei Zhao & Scott J.Savage & Yongmin Chen, 2007. "Reputation, Location and Prices in Chinese Electronic Commerce Markets," Working Papers 0701, China Agricultural University, College of Economics and Management.
  • Handle: RePEc:cau:wpaper:0701
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    File URL: http://www.cau.edu.cn/cem/news/newsfj/2007E001pdf
    File Function: First version, 2007
    Download Restriction: no
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    More about this item

    Keywords

    E-commerce; Reputation; Internet; Location; Prices;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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