Location Still Matters: Evidence from an Online Shopping Field Experiment

23 Pages Posted: 21 Dec 2014 Last revised: 29 Apr 2018

See all articles by John Morgan

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group

David Ong

Jinan University-University of Birmingham Joint Institute

Zemin (Zachary) Zhong

University of Toronto, Rotman School of Management

Date Written: December 20, 2014

Abstract

Many empirical studies of online price dispersion show that sellers post different prices for homogeneous goods. However, seller heterogeneity is difficult to control for and posted prices may not reflect price dispersion in actual transactions. We contribute to this literature by selling identical simple goods (cell phone credits) at different prices from sellers that were identical except in name and with minimal ratings. The only way consumers could find us in this extremely thick market is to rank by price from lowest to highest. Out of 514 sales, 73 were of the higher priced item, for which we had non-negligible demand even when the price gap was 2.5%. Thus, even this selected sample of price-sensitive consumers do not necessarily buy the lowest priced item, all else being equal. Using independent variation in screen location and price, we are able to distinguish for the first time between search cost and limited attention based price dispersion.

Keywords: Price dispersion, limited attention, field experiment, e-retail

JEL Classification: C93, D4, D8, M3, L11

Suggested Citation

Morgan, John and Ong, David and Zhong, Zemin (Zachary), Location Still Matters: Evidence from an Online Shopping Field Experiment (December 20, 2014). Journal of Economic Behavior and Organization, Vol. 146, pp. 43-54, 2018, DOI: 10.1016/j.jebo.2017.11.021. Available at SSRN: https://ssrn.com/abstract=2540792 or http://dx.doi.org/10.2139/ssrn.2540792

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States
510-642-2669 (Phone)
810-885-5959 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/rjmorgan/

David Ong (Contact Author)

Jinan University-University of Birmingham Joint Institute ( email )

Jinan University
University City, Panyu
Guangzhou, Guangdong 510632
China

HOME PAGE: http://https://birmingham.jnu.edu.cn/

Zemin (Zachary) Zhong

University of Toronto, Rotman School of Management ( email )

105 St. George St.
Rotman School of Management
Toronto, Ontario M5S 3E6
Canada

HOME PAGE: http://zacharyzhong.com

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