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Price Dispersion on the Internet: Good Firms and Bad Firms

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  • Kathy Baylis
  • Jeffrey Perloff

Abstract

Internet firms charge a wide range of prices for such homogeneous products, and high-priced firms remain high-priced and low-priced firms remain low-priced over long periods. One explanation is that high-price firms are charging a premium for superior service. An alternative explanation is that firms price discriminate across informed and uniformed consumers (Salop and Stiglitz 1977) or between serious shoppers and others (Wilde and Schwartz 1979). The pricing pattern for a digital camera and a flatbed scanner is consistent with the price-discrimination model and inconsistent with the service-premium story.
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  • Kathy Baylis & Jeffrey Perloff, 2002. "Price Dispersion on the Internet: Good Firms and Bad Firms," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 21(3), pages 305-324, November.
    • Handle: RePEc:kap:revind:v:21:y:2002:i:3:p:305-324
    DOI: 10.1023/A:1020415304514
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