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Pricing Strategies in E-Commerce: Bricks vs. Clicks

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Author Info

  • Friberg, Richard

    ()
    (Stockholm School of Economics)

  • Ganslandt, Mattias

    ()
    (The Research Institute of Industrial Economics)

  • Sandström, Mikael

    ()
    (Swedish Research Institute of Trade (HUI))

Abstract

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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Bibliographic Info

Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 559.

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Length: 23 pages
Date of creation: 21 Jun 2001
Date of revision:
Handle: RePEc:hhs:iuiwop:0559

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Keywords: Retail Pricing; Consumer Behavior; E-Commerce; Price Discrimination;

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References

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  1. Karen Clay & Ramayya Krishnan & Eric Wolff, 2001. "Prices and Price Dispersion on the Web: Evidence from the Online Book Industry," NBER Chapters, in: E-commerce, pages 521-539 National Bureau of Economic Research, Inc.
  2. Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, 03.
  3. Dennis W. Carlton & Judith A. Chevalier, 2001. "Free Riding and Sales Strategies for the Internet," NBER Chapters, in: E-commerce, pages 441-461 National Bureau of Economic Research, Inc.
  4. Fiona Scott Morton & Florian Zettelmeyer & Jorge Silva Risso, 2000. "Internet Car Retailing," NBER Working Papers 7961, National Bureau of Economic Research, Inc.
  5. Armstrong, Mark, 1999. "Price Discrimination by a Many-Product Firm," Review of Economic Studies, Wiley Blackwell, vol. 66(1), pages 151-68, January.
  6. Yannis Bakos, 2001. "The Emerging Landscape for Retail E-Commerce," Journal of Economic Perspectives, American Economic Association, vol. 15(1), pages 69-80, Winter.
  7. Anderson, Simon P & Ginsburgh, Victor A, 1999. "International Pricing with Costly Consumer Arbitrage," Review of International Economics, Wiley Blackwell, vol. 7(1), pages 126-39, February.
  8. Asplund, Marcus & Sandin, Rickard, 1995. "Competition in Interrelated Markets: An Empirical Study," Working Paper Series in Economics and Finance 84, Stockholm School of Economics.
  9. Mussa, Michael & Rosen, Sherwin, 1978. "Monopoly and product quality," Journal of Economic Theory, Elsevier, vol. 18(2), pages 301-317, August.
  10. Michael Smith & Erik Brynjolfsson, 1999. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Computing in Economics and Finance 1999 1022, Society for Computational Economics.
  11. Friberg, Richard & Ganslandt, Mattias & Sandström, Mikael, 2000. "E-commerce and prices - theory and evidence," Working Paper Series in Economics and Finance 389, Stockholm School of Economics, revised 08 Sep 2000.
  12. Austan Goolsbee, 2001. "Competition in the Computer Industry," NBER Working Papers 8351, National Bureau of Economic Research, Inc.
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Cited by:
  1. Eric Brousseau, 2002. "The Governance of Transactions by Commercial Intermediaries: An Analysis of the Re-engineering of Intermediation by Electronic Commerce," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 9(3), pages 353-374.
  2. Maarten C.W. Janssen & Rob van der Noll, 2005. "Internet Retailing as a Marketing Strategy," Tinbergen Institute Discussion Papers 05-038/1, Tinbergen Institute.
  3. 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.
  4. Oz Shy, 2013. "Window shopping," Working Papers 13-4, Federal Reserve Bank of Boston.

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