The Great Equalizer? Consumer Choice Behavior at Internet Shopbots
Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)
Michael D. Smith
Carnegie Mellon University - H. John Heinz III School of Public Policy and Management
MIT Sloan Working Paper No. 4208-01
Our research empirically analyzes consumer behavior at Internet shopbots- sites that allow consumers to make "one-click" price comparisons for product offerings from multiple retailers. By allowing researchers to observe exactly what information the consumer is shown and their search behavior in response to this information, shopbot data has unique strengths for analyzing consumer behavior.
Furthermore, the method in which the data is displayed to consumers lends itself to a utility-based evaluation process, consistent with econometric analysis techniques.
While price is an important determinant of customer choice, we find that, even among shopbot consumers, branded retailers and retailers a consumer visited previously hold significant price advantages in head-to-head price comparisons. Further, customers are very sensitive to how the total price is allocated among the item price, the shipping cost, and tax, and are also quite sensitive to the ordinal ranking of retailer offerings with respect to price. We also find that consumers use brand as a proxy for a retailer's credibility with regard to non-contractible aspects of the product bundle such as shipping time. In each case our models accurately predict consumer behavior out of sample, suggesting that our analyses effectively capture relevant aspects of consumer choice processes.
Number of Pages in PDF File: 65
Keywords: Internet, Choice Models, Brand, Service Quality, Partitioned Pricing, Intermediariesworking papers series
Date posted: November 19, 2001
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