Price Competition between Pure Play vs. Bricks-and-Clicks E-Tailers: Analytical Model and Empirical Analysis

42 Pages Posted: 13 Nov 2002

See all articles by Xing Pan

Xing Pan

Independent

Venkatesh Shankar

Texas A&M University - Department of Marketing

Brian T. Ratchford

University of Texas at Dallas

Date Written: July 2002

Abstract

In this paper, we first develop a game theoretic model of price competition between a pure play e-tailer and a bricks-and-clicks e-tailer. We show that in general, the pure play e-tailer has a lower equilibrium price. We then develop a simultaneous equation model of e-tailer price and traffic and estimate this model using data collected from 905 e-tailers across eight product categories. The empirical results show that after controlling for the effects of other variables, prices at pure play e-tailers are generally lower. E-tailers with high traffic do not always command higher prices. E-tailers with high level of reliability, shopping convenience, and deep information, generally do not generate high web traffic and do not enjoy high prices. However, trust enhances e-tailer traffic and early online entry is associated with both high e-tailer traffic and high prices.

Keywords: Pricing, E-Commerce, E-Tailing, Internet marketing, Information economics

JEL Classification: D40, L11, L81, L86, M31

Suggested Citation

Pan, Xing and Shankar, Venkatesh and Ratchford, Brian T., Price Competition between Pure Play vs. Bricks-and-Clicks E-Tailers: Analytical Model and Empirical Analysis (July 2002). Available at SSRN: https://ssrn.com/abstract=328840 or http://dx.doi.org/10.2139/ssrn.328840

Xing Pan (Contact Author)

Independent

No Address Available

Venkatesh Shankar

Texas A&M University - Department of Marketing ( email )

430 Wehner
College Station, TX 77843-4218
United States

HOME PAGE: http://www.venkyshankar.com

Brian T. Ratchford

University of Texas at Dallas ( email )

2601 North Floyd Road
Richardson, TX 75083
United States

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