What is the impact of the increasing dominance of conventional firms in e-commerce? We use a simple model to show that retailers who only sell through Internet have lower on-line prices than retailers who also sell through conventional stores. This proposition is firmly supported by our empirical analysis which uses a rich data set covering the Swedish markets for books and CDs. On average, prices of these goods are 15 percent cheaper on Internet, but if a single item is bought transport costs will make it as expensive to buy over Internet as in a conventional store (if a basket of goods is bought it is some 10 percent cheaper on Internet since transport costs are fixed).
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Length: 17 pages Date of creation: 2001 Date of revision: Handle: RePEc:fth:iniesr:559
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Find related papers by JEL classification: L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
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Michael R. Baye & John Morgan & Patrick Scholten, 2006.
"Information, Search, and Price Dispersion,"
Working Papers
2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
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