Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site
AbstractThis paper examines 4 million daily price observations for over 1000 consumer electronics products on the price comparison site Shopper.com. We find little support for the notion that prices on the Internet are converging to the “law of one price.” In addition, observed levels of price dispersion vary systematically with the number of firms listing prices. The difference between the two lowest prices (the “gap”) averages 22 percent when two firms list prices, and falls to 3.5 percent in markets where 17 firms list prices. These empirical results are an implication of a general “clearinghouse” model of equilibrium price dispersion.
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Bibliographic InfoPaper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2004-03.
Date of creation: 2004
Date of revision:
Publication status: Published in Journal of Industrial Economics, 2004
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Bertrand Competition; Internet; Law of One Price; Price dispersion;
Other versions of this item:
- Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 463-496, December.
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- D4 - Microeconomics - - Market Structure and Pricing
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- M3 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising
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