Measuring Prices and Price Competition Online: Amazon and Barnes and Noble

27 Pages Posted: 1 Aug 2002  

Austan Goolsbee

University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)

Judith A. Chevalier

Yale School of Management; National Bureau of Economic Research (NBER)

Multiple version iconThere are 2 versions of this paper

Date Written: June 2002

Abstract

Despite the interest in measuring price sensitivity of online consumers, most academic work on Internet commerce is hindered by a lack of data on quality. In this paper we use publicly available data on the sales ranks of about 20,000 books to derive quantity proxies at the two leading online booksellers. Matching this information to prices, we can directly estimate the elasticities of demand facing both merchants as well as create a consumer price index for online books. The results show significant price sensitivity at both merchants but demand at Barnes and Noble is much more price-elastic than is demand at Amazon. The data also allows us to estimate the magnitude of retail outlet substitution bias in the CPI due to the rise of Internet sales. The estimates suggest that prices online are much more variable than the CPI, which understates inflation by more than double in one period and gets the sign wrong in another.

JEL Classification: L13, L81

Suggested Citation

Goolsbee, Austan and Chevalier, Judith A., Measuring Prices and Price Competition Online: Amazon and Barnes and Noble (June 2002). Yale ICF Working Paper No. 02-23. Available at SSRN: https://ssrn.com/abstract=319701 or http://dx.doi.org/10.2139/ssrn.319701

Austan Goolsbee

University of Chicago - Booth School of Business ( email )

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Chicago, IL 60637
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National Bureau of Economic Research (NBER)

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Judith A. Chevalier (Contact Author)

Yale School of Management ( email )

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New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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