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Does Information Undermine Brand? Information Intermediary Use and Preference for Branded Web Retailers

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  • Joel Waldfogel
  • Lu Chen

Abstract

Investments in brand provide one method for vendors to become known and convince potential customers that vendors will deliver as promised. Alternatively, third-party information on retailers' existence, as well as whether they tend to keep their commitments can serve a similar function and may undermine investments in brand. This study uses a 13-month panel dataset on 1998-99 Internet shopping behavior and use of information intermediaries by over 30,000 households to examine whether information use undermines brand. We find that individuals who take up using price comparison sites reduce their shopping at a broad group of branded retailers by about a tenth. Users of pure price comparison sites, such as DealTime and mySimon, also reduce their Amazon by about a tenth, while individuals using BizRate, which provides both price comparison and vendor reliability information, reduce their Amazon shopping by a fifth. The results have possible implications for both firm strategy and the evolution of market structure. If information weakens the pull of brand, then Internet retailing may grow less concentrated over time.

Suggested Citation

  • Joel Waldfogel & Lu Chen, 2003. "Does Information Undermine Brand? Information Intermediary Use and Preference for Branded Web Retailers," NBER Working Papers 9942, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:9942
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    References listed on IDEAS

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    1. Kwoka, John E, Jr, 1984. "Advertising and the Price and Quality of Optometric Services," American Economic Review, American Economic Association, vol. 74(1), pages 211-216, March.
    2. Joel Waldfogel & Jeffrey Milyo, 1999. "The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart," American Economic Review, American Economic Association, vol. 89(5), pages 1081-1096, December.
    3. 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.
    4. Michael D. Smith & Erik Brynjolfsson, 2001. "Consumer Decision-making at an Internet Shopbot: Brand Still Matters," NBER Chapters,in: E-commerce, pages 541-558 National Bureau of Economic Research, Inc.
    5. Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, March.
    6. Erik Brynjolfsson & Michael D. Smith, 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Management Science, INFORMS, vol. 46(4), pages 563-585, April.
    7. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June.
    8. Clay, Karen, et al, 2002. "Retail Strategies on the Web: Price and Non-price Competition in the Online Book Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 50(3), pages 351-367, September.
    9. Baltagi, Badi H. & Wu, Ping X., 1999. "Unequally Spaced Panel Data Regressions With Ar(1) Disturbances," Econometric Theory, Cambridge University Press, vol. 15(06), pages 814-823, December.
    10. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213-213.
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    Cited by:

    1. Alberto Cavaliere, 2005. "Price Competition and Consumer Externalities in a Vertically Differentiated Duopoly with Information Disparities," Journal of Economics, Springer, vol. 86(1), pages 29-64, October.
    2. Alexia Gaudeul, 2010. "Software marketing on the Internet: the use of samples and repositories," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 19(3), pages 259-281.
    3. Steve Thompson, 2009. "Grey Power: An Empirical Investigation of the Impact of Parallel Imports on Market Prices," Journal of Industry, Competition and Trade, Springer, vol. 9(3), pages 219-232, September.
    4. Alberto Cavaliere, 2004. "Price Competition with Information Disparities in a Vertically Differentiated Duopoly," Working Papers 2004.39, Fondazione Eni Enrico Mattei.

    More about this item

    JEL classification:

    • F1 - International Economics - - Trade
    • N10 - Economic History - - Macroeconomics and Monetary Economics; Industrial Structure; Growth; Fluctuations - - - General, International, or Comparative

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