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Price Setting in Online Markets: Does IT Click?

Author

Listed:
  • Yuriy Gorodnichenko
  • Viacheslav Sheremirov
  • Oleksandr Talavera

Abstract

Using a unique dataset of daily U.S. and U.K. price listings and the associated number of clicks for precisely defined goods from a major shopping platform, we shed new light on how prices are set in online markets, which have a number of special properties such as low search costs, low costs of monitoring competitors' prices, and low costs of nominal price adjustment. We document that although online prices are more flexible than offline prices, they continue to exhibit relatively long spells of fixed prices, large size and low synchronization of price changes, considerable cross-sectional dispersion, and low sensitivity to predictable or unanticipated changes in demand conditions. Qualitatively these patterns are similar to those observed for offline prices, which calls for more research on the sources of price rigidities and dispersion.

Suggested Citation

  • Yuriy Gorodnichenko & Viacheslav Sheremirov & Oleksandr Talavera, 2014. "Price Setting in Online Markets: Does IT Click?," NBER Working Papers 20819, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:20819
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    References listed on IDEAS

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    Blog mentions

    As found by EconAcademics.org, the blog aggregator for Economics research:
    1. Are prices getting less sticky?
      by JP Koning in Moneyness on 2015-10-15 07:12:00

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    Cited by:

    1. Yuriy Gorodnichenko & Oleksandr Talavera, 2017. "Price Setting in Online Markets: Basic Facts, International Comparisons, and Cross-Border Integration," American Economic Review, American Economic Association, vol. 107(1), pages 249-282, January.
    2. Alberto Cavallo, 2017. "Are Online and Offline Prices Similar? Evidence from Large Multi-channel Retailers," American Economic Review, American Economic Association, vol. 107(1), pages 283-303, January.
    3. repec:eee:jbrese:v:80:y:2017:i:c:p:63-72 is not listed on IDEAS
    4. Itai Ater & Oren Rigbi, 2018. "The Effects of Mandatory Disclosure of Supermarket Prices," CESifo Working Paper Series 6942, CESifo Group Munich.
    5. repec:kap:jincot:v:17:y:2017:i:4:d:10.1007_s10842-017-0246-3 is not listed on IDEAS
    6. Alberto Cavallo & Roberto Rigobon, 2016. "The Billion Prices Project: Using Online Prices for Measurement and Research," Journal of Economic Perspectives, American Economic Association, vol. 30(2), pages 151-178, Spring.
    7. Flavio Delbono & Gemma Dipoppa & Luca Lambertini & Carlo Reggiani, 2017. "A Single Espresso, Please! Rationalizing Espresso Price Dispersion Across Italian Cities," Journal of Industry, Competition and Trade, Springer, vol. 17(4), pages 465-478, December.
    8. Liu, Yue, 2016. "Price dispersion across countries and the heterogeneous impacts of income differences," Economics Letters, Elsevier, vol. 140(C), pages 64-67.
    9. Alberto Cavallo, 2018. "Scraped Data and Sticky Prices," The Review of Economics and Statistics, MIT Press, vol. 100(1), pages 105-119, March.
    10. repec:fip:fedreq:00045 is not listed on IDEAS
    11. Raphael Boleslavsky & Christopher Cotton & Haresh Gurnani, 2015. "Demonstrations and Price Competition in New Product Release," Working Papers 1347, Queen's University, Department of Economics.
    12. S. Dupraz, 2017. "A Kinked-Demand Theory of Price Rigidity," Working papers 656, Banque de France.
    13. Sheremirov, Viacheslav, 2015. "Price dispersion and inflation: new facts and theoretical implications," Working Papers 15-10, Federal Reserve Bank of Boston.

    More about this item

    JEL classification:

    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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