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Prices and Price Dispersion on the Web: Evidence from the Online Book Industry

In: E-commerce

  • Karen Clay
  • Ramayya Krishnan
  • Eric Wolff

Using data collected between August, 1999, and January, 2000, covering 399 books, we examine pricing by thirty-two online United States-based bookstores. At the aggregate level, we find that both advertising and competitive structure had the predicted effects. More competition led to lower prices and to lower price dispersion. Holding competitive structure constant, more widely advertised items also had lower prices. At the firm level, we observe considerable heterogeneity in behavior. Firms had differentiated (or attempted to differentiate) on dimensions such as brand, price, and selection. Copyright 2001 by Blackwell Publishing Ltd

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This chapter was published in:
  • Severin Borenstein & Garth Saloner, 2001. "E-commerce," NBER Books, National Bureau of Economic Research, Inc, number bore01-1, December.
  • This item is provided by National Bureau of Economic Research, Inc in its series NBER Chapters with number 12318.
    Handle: RePEc:nbr:nberch:12318
    Contact details of provider: Postal: National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.
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    1. Benham, Lee, 1972. "The Effect of Advertising on the Price of Eyeglasses," Journal of Law and Economics, University of Chicago Press, vol. 15(2), pages 337-52, October.
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    7. Michael T Rauh, 1997. "A Model of Temporary Search Market Equilibrium," Economics Working Paper Archive 392, The Johns Hopkins University,Department of Economics.
    8. Arnold, Michael A, 2000. "Costly Search, Capacity Constraints, and Bertrand Equilibrium Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 117-31, February.
    9. Feldman, Roger D & Begun, James W, 1980. "Does Advertising of Prices Reduce the Mean and Variance of Prices?," Economic Inquiry, Western Economic Association International, vol. 18(3), pages 487-92, July.
    10. Wilde, Louis L & Schwartz, Alan, 1979. "Equilibrium Comparison Shopping," Review of Economic Studies, Wiley Blackwell, vol. 46(3), pages 543-53, July.
    11. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
    12. D. Grant Devine & Bruce W. Marion, 1979. "The Influence of Consumer Price Information on Retail Pricing and Consumer Behavior," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 61(2), pages 228-237.
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    14. Glazer, Amihai, 1981. "Advertising, Information, and Prices-A Case Study," Economic Inquiry, Western Economic Association International, vol. 19(4), pages 661-71, October.
    15. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
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