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Search and Product Differentiation at an Internet Shopbot

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Author Info
Brynjolfsson, Erik
Dick, Astrid Andrea
Smith, Michael D.

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Abstract

Price dispersion among commodity goods is typically attributed to consumer search costs. We explore the magnitude of consumer search costs using a data set obtained from a major Internet shopbot. For the median consumer, the benefits to searching lower screens are $2.24 while the cost of an exhaustive search of the offers is a maximum of $2.03. Interestingly, in our setting, consumers who search more intensively are less price sensitive than other consumers, reflecting their increased weight on retailer differentiation in delivery time and reliability. Our results demonstrate that even in this nearly-perfect market, substantial price dispersion can exist in equilibrium from consumers preferences over both price and non-price attributes

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File URL: http://hdl.handle.net/1721.1/5046
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Publisher Info
Paper provided by Massachusetts Institute of Technology (MIT), Sloan School of Management in its series Working papers with number 4441-03.

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Date of creation: 05 Mar 2004
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Handle: RePEc:mit:sloanp:5046

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Postal: MASSACHUSETTS INSTITUTE OF TECHNOLOGY (MIT), SLOAN SCHOOL OF MANAGEMENT, 50 MEMORIAL DRIVE CAMBRIDGE MASSACHUSETTS 02142 USA

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Related research
Keywords: search costs; shopbot; product differentiation; random coefficients choice model;

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References listed on IDEAS
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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    Other versions:
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    Other versions:
  4. Simon P. Anderson & Regis Renault, 1999. "Pricing, product diversity, and search costs: a Bertrand-Chamberlin-Diamond model," Virginia Economics Online Papers 335, University of Virginia, Department of Economics. [Downloadable!]
    Other versions:
  5. Clay, Karen, et al, 2002. "Retail Strategies on the Web: Price and Non-price Competition in the Online Book Industry," Journal of Industrial Economics, Blackwell Publishing, vol. 50(3), pages 351-67, September. [Downloadable!] (restricted)
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    Other versions:
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    Other versions:
  14. Austan Goolsbee & Judith Chevalier, 2002. "Measuring Prices and Price Competition Online: Amazon and Barnes and Noble," NBER Working Papers 9085, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
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Full references

Cited by:
(explanations, 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.)

  1. 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. [Downloadable!]
  2. Anindya Ghose & Bin Gu, 2006. "Search Costs, Demand Structure and Long Tail in Electronic Markets: Theory and Evidence," Working Papers 06-19, NET Institute, revised Oct 2006. [Downloadable!]
  3. Lesley Chiou, 2005. "Empirical Analysis of Retail Competition: Spatial Differentiation at Wal-Mart, Amazon.com, and Their Competitors," Occidental Economics Working Papers 3, Occidental College, Department of Economics, revised Nov 2006. [Downloadable!]
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