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Valuing Internet Retailers: Amazon and Barnes and Noble

Posted: 2 Oct 2003  

Judith A. Chevalier

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

Austan Goolsbee

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

Date Written: August 2003

Abstract

Many Internet retailers must raise margins in the future if they are to survive. This raises the important issues of whether they will be able to raise margins as well as how valuation estimates made today should evaluate projected changes to margins in the future. In this paper, we describe retail strategies of pricing for market share in growing markets and show how measures of the price elasticity of demand facing retailers in the current year can be combined with standard accounting variables to inform calculations about future margins. Our analysis suggests that the capital market projects greater future margin improvements for Amazon.com than for BN.com and that this may be due to Amazon benefiting from network effects.

JEL Classification: L11, L13, L81, G120

Suggested Citation

Chevalier, Judith A. and Goolsbee, Austan, Valuing Internet Retailers: Amazon and Barnes and Noble (August 2003). Advances in Applied Microeconomics, Vol. 12, 2003. Available at SSRN: https://ssrn.com/abstract=441480

Judith A. Chevalier (Contact Author)

Yale School of Management ( email )

135 Prospect Street
P.O. Box 208200
New Haven, CT 06520-8200
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Austan Goolsbee

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-5869 (Phone)
773-702-0458 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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