Beyond the Hype of Frictionless Markets: Evidence of Heterogeneity in Price Rigidity on the Internet

Journal of Management Information Systems, Vol. 22, No. 2, pp. 57-89, Fall 2005

36 Pages Posted: 9 Feb 2009

See all articles by Mark E. Bergen

Mark E. Bergen

University of Minnesota - Carlson School of Management

Robert J. Kauffman

Singapore Management University; Singapore Management University - School of Information Systems

Dongwon Lee

Korea University Business School

Date Written: February 9, 2009

Abstract

We explore daily patterns of Internet pricing for the two major retailers, Amazon.com and Barnes and Noble.com (BN), using data on 377 books collected over a 449-day period in 2003-2004. We frame this investigation in terms of a key question: How rigid are prices on the Internet? Are there reasons to suggest that prior predictions of more flexible prices on the Internet may not have been founded on the appropriate theoretical knowledge? We find that Internet retailers, in contrast with traditional firms, adjust prices any day of the week throughout the year. Yet, firms' price adjustments for books occur much less frequently than daily-every 90 days on average. For most observers of Internet-based selling, this is surprising, since most expect more frequent price adjustments-based on the quality of technological environment that supports price-setting. In fact, our results show that price change activity appears to vary by book category, from a high of one change on average every 61 days for bestsellers to a low of one change every 184 days on average for steadysellers. In addition, we learned that individual firms exhibited different patterns for their price changes: Amazon changed book prices every 222 days, while BN changed its book prices more frequently, every 56 days on average.

Keywords: Bookselling, e-commerce, economic analysis, empirical research, empirical regularities, Internet retailing, price rigidity, strategic pricing

Suggested Citation

Bergen, Mark E. and Kauffman, Robert J. and Lee, Dongwon, Beyond the Hype of Frictionless Markets: Evidence of Heterogeneity in Price Rigidity on the Internet (February 9, 2009). Journal of Management Information Systems, Vol. 22, No. 2, pp. 57-89, Fall 2005 . Available at SSRN: https://ssrn.com/abstract=1339847

Mark E. Bergen

University of Minnesota - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States
612-624-1821 (Phone)

Robert J. Kauffman

Singapore Management University ( email )

Li Ka Shing Library
70 Stamford Road
Singapore 178901, 178899
Singapore
65-6828-929 (Phone)

Singapore Management University - School of Information Systems ( email )

80 Stamford Road
Singapore, 178902
Singapore

Dongwon Lee (Contact Author)

Korea University Business School ( email )

Anam-Dong, Seongbuk-Gu
Seoul, 136701
Korea, Republic of (South Korea)

HOME PAGE: http://dongwon.info

Register to save articles to
your library

Register

Paper statistics

Downloads
53
rank
355,747
Abstract Views
418
PlumX