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The Impacts of Shopbots on Online Consumer Search

Online price comparison agents (shopbots) allow consumers to instantaneously receive price and other information from many online retailers. Online consumer clickstream data from ComScore Inc.demonstrate that consumers are increasingly using shopbots to conduct search. This phenomenon raises such questions as "how do shopbots change consumers’ search behavior?" and "do they reduce consumers’ online search?" Conventional wisdom suggests that consumers are expected to search less because shopbots have displayed prices and other relative information from retailers on the search result page(s). Surprisingly, this study demonstrates the opposite result. That is, consumers are actually visiting more online retailer web sites after using shopbots. This finding suggests that after searching for an item through a shopbot and receiving the price information, consumers will continue to look for detailed information about the online retailers by visiting their web sites. The empirical finding is explained by an analytical model, which shows that on the one hand shopbots reduce the marginal benefit of searching additional online stores; on the other hand they reduce the cost of search. Therefore whether shopbots reduce consumer search depends on the cost of reducing per unit of risk, which is decided by a number of factors, such as marginal search costs, price dispersion and quality differentiation among stores, price and quality correlation, and consumers’ relative preference for service quality.

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Paper provided by NET Institute in its series Working Papers with number 07-34.

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Length: 28 pages
Date of creation: Sep 2007
Date of revision: Sep 2007
Handle: RePEc:net:wpaper:0734
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  1. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-54, May.
  2. Karen Clay & Ramayya Krishnan & Eric Wolff, 2001. "Prices and Price Dispersion on the Web: Evidence from the Online Book Industry," NBER Working Papers 8271, National Bureau of Economic Research, Inc.
  3. Han Hong & Matthew Shum, 2006. "Using price distributions to estimate search costs," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 257-275, 06.
  4. K. Sudhir & Yuxin Chen, 2001. "When Shopbots Meet Emails: Implications for Price Competition on the Internet," Yale School of Management Working Papers ysm247, Yale School of Management.
  5. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, vol. 69, pages 213.
  6. Rami Zwick & Amnon Rapoport & Alison King Chung Lo & A. V. Muthukrishnan, 2003. "Consumer Sequential Search: Not Enough or Too Much?," Marketing Science, INFORMS, vol. 22(4), pages 503-519, October.
  7. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
  8. Moorthy, Sridhar & Ratchford, Brian T & Talukdar, Debabrata, 1997. " Consumer Information Search Revisited: Theory and Empirical Analysis," Journal of Consumer Research, University of Chicago Press, vol. 23(4), pages 263-77, March.
  9. 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.
  10. Smith, Michael D & Brynjolfsson, Erik, 2001. "Consumer Decision-Making at an Internet Shopbot: Brand Still Matters," Journal of Industrial Economics, Wiley Blackwell, vol. 49(4), pages 541-58, December.
  11. repec:rje:randje:v:37:y:2006:2:p:257-275 is not listed on IDEAS
  12. Diehl, Kristin & Kornish, Laura J & Lynch, John G, Jr, 2003. " Smart Agents: When Lower Search Costs for Quality Information Increase Price Sensitivity," Journal of Consumer Research, University of Chicago Press, vol. 30(1), pages 56-71, June.
  13. Urbany, Joel E & Dickson, Peter R & Wilkie, William L, 1989. " Buyer Uncertainty and Information Search," Journal of Consumer Research, University of Chicago Press, vol. 16(2), pages 208-15, September.
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