Price Setting in Online Markets: Does it Click?

62 Pages Posted: 5 Jan 2015 Last revised: 22 May 2021

See all articles by Yuriy Gorodnichenko

Yuriy Gorodnichenko

University of California, Berkeley - Department of Economics; National Bureau of Economic Research (NBER); IZA Institute of Labor Economics

Viacheslav Sheremirov

Federal Reserve Banks - Federal Reserve Bank of Boston

Oleksandr Talavera

Swansea University - School of Management

Multiple version iconThere are 2 versions of this paper

Date Written: December 2014

Abstract

Using a unique dataset of daily U.S. and U.K. price listings and the associated number of clicks for precisely defined goods from a major shopping platform, we shed new light on how prices are set in online markets, which have a number of special properties such as low search costs, low costs of monitoring competitors' prices, and low costs of nominal price adjustment. We document that although online prices are more flexible than offline prices, they continue to exhibit relatively long spells of fixed prices, large size and low synchronization of price changes, considerable cross-sectional dispersion, and low sensitivity to predictable or unanticipated changes in demand conditions. Qualitatively these patterns are similar to those observed for offline prices, which calls for more research on the sources of price rigidities and dispersion.

Suggested Citation

Gorodnichenko, Yuriy and Sheremirov, Viacheslav and Talavera, Oleksandr, Price Setting in Online Markets: Does it Click? (December 2014). NBER Working Paper No. w20819, Available at SSRN: https://ssrn.com/abstract=2545217

Yuriy Gorodnichenko (Contact Author)

University of California, Berkeley - Department of Economics ( email )

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Viacheslav Sheremirov

Federal Reserve Banks - Federal Reserve Bank of Boston ( email )

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Oleksandr Talavera

Swansea University - School of Management ( email )

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