Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site

34 Pages Posted: 21 Dec 2004

See all articles by John Morgan

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group

Michael R. Baye

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Patrick A. Scholten

Bentley University - Department of Economics

Abstract

This paper examines four million daily price observations for more than 1,000 consumer electronics products on the price comparison site http://Shopper.com. We find little support for the notion that prices on the Internet are converging to the 'law of one price.' In addition, observed levels of price dispersion vary systematically with the number of firms listing prices. The difference between the two lowest prices (the 'gap') averages 23 per cent when two firms list prices, and falls to 3.5 per cent in markets where 17 firms list prices. These empirical results are an implication of a general 'clearinghouse' model of equilibrium price dispersion.

Suggested Citation

Morgan, John and Baye, Michael Roy and Scholten, Patrick A., Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site. Journal of Industrial Economics, Vol. 52, No. 4, pp. 463-496, December 2004. Available at SSRN: https://ssrn.com/abstract=629957

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/

Michael Roy Baye (Contact Author)

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-855-2779 (Phone)
812-855-3354 (Fax)

Patrick A. Scholten

Bentley University - Department of Economics ( email )

175 Forest Street
Waltham, MA 02452-4705
United States

Here is the Coronavirus
related research on SSRN

Paper statistics

Downloads
35
Abstract Views
1,652
PlumX Metrics