The Nature of Sales in Online Markets: Asymmetric Consumer Information or Benefits to Bulk Shopping?
30 Pages Posted: 31 May 2007
Date Written: July 2006
Abstract
Price dispersion - firms charging different prices for the same product - is widely observed in both online and traditional offline markets. While most price dispersion is explained by stylized clearinghouse models such as Varian (1980), these models do not explain why prices in offline markets are lower on weekends than during the work week, and before Christmas than after Christmas. We argue that price dispersion online is fully explained by clearinghouse models. First, because search and travel costs are lower online, these anomalous pricing patterns disappear. Second, prices charged by firms, price dispersion, the number of firms posting prices, and the minimum price in the online markets for several products vary in ways that are all consistent with the predictions of clearinghouse models.
Keywords: Price Dispersion, Price Competition, Internet, Information
JEL Classification: L100, L130, L150
Suggested Citation: Suggested Citation
Do you have a job opening that you would like to promote on SSRN?
Recommended Papers
-
Does the Internet Make Markets More Competitive?
By Jeffrey R. Brown and Austan Goolsbee
-
Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry
By Jeffrey R. Brown and Austan Goolsbee
-
Prices and Price Dispersion on the Web: Evidence from the Online Book Industry
By Karen Clay, Ramayya Krishnan, ...
-
Search, Obfuscation, and Price Elasticities on the Internet
By Glenn Ellison and Sara Fisher Ellison
-
Search, Obfuscation, and Price Elasticities on the Internet
By Glenn Ellison and Sara Fisher Ellison
-
Evidence on Learning and Network Externalities in the Diffusion of Home Computers
By Austan Goolsbee and Peter J. Klenow
-
In a World Without Borders: The Impact of Taxes on Internet Commerce
-
In a World Without Borders: the Impact of Taxes on Internet Commerce
-
Understanding Digital Markets: Review and Assesment
By Michael D. Smith, Joseph Bailey, ...