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Quality-based Price Discrimination: Evidence from Internet Retailers’ Shipping Options

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  • Li, Han
  • Dinlersoz, Emin

Abstract

This paper tests various implications of quality-based price discrimination theory in the context of internet book retailers’ shipping menus. Many internet retailers create quality variants of a homogeneous good by bundling it with several shipping options that differ by delivery time. This practice can allow retailers to extract further surplus from consumers through quality-based price discrimination. We find that the design of shipping menus offered by large retailers is consistent with main implications of quality-based price discrimination theory. Fringe sellers, however, do not appear to engage in price discrimination based on quality.

Suggested Citation

  • Li, Han & Dinlersoz, Emin, 2012. "Quality-based Price Discrimination: Evidence from Internet Retailers’ Shipping Options," Journal of Retailing, Elsevier, vol. 88(2), pages 276-290.
    • Handle: RePEc:eee:jouret:v:88:y:2012:i:2:p:276-290
    DOI: 10.1016/j.jretai.2011.12.002
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    Cited by:

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    2. Bourreau, Marc & Manenti, Fabio M., 2023. "Selling cross-border in online markets: The impact of the ban on geoblocking strategies," International Journal of Industrial Organization, Elsevier, vol. 86(C).
    3. Pappas, Alec & Fumagalli, Elena & Rouziou, Maria & Bolander, Willy, 2023. "More than Machines: The Role of the Future Retail Salesperson in Enhancing the Customer Experience," Journal of Retailing, Elsevier, vol. 99(4), pages 518-531.
    4. He, Qingxin & Lee, Jonathan M., 2016. "The effect of coal combustion byproducts on price discrimination by upstream industries," International Journal of Industrial Organization, Elsevier, vol. 44(C), pages 11-24.
    5. MohammadRezaei, Fakhroddin & Mohd-Saleh, Norman & Ahmed, Kamran, 2018. "Audit Firm Ranking, Audit Quality and Audit Fees: Examining Conflicting Price Discrimination Views," The International Journal of Accounting, Elsevier, vol. 53(4), pages 295-313.

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