Online Price Dispersion
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Why Is Price Dispersion Higher Online Than Offline The Impact Of Retailer Type And Shopping Risk On Price Dispersion
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Author : Hejun Zhuang
language : en
Publisher:
Release Date : 2018
Why Is Price Dispersion Higher Online Than Offline The Impact Of Retailer Type And Shopping Risk On Price Dispersion written by Hejun Zhuang and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
When physically similar products, of similar quality, are offered by retailers both online and offline, we often observe that the dispersion in prices of these products online is greater than the price dispersion offline. This observation runs counter to early theories that suggested price dispersion online would be smaller than that offline due to the ease of search and information availability online. This paper investigates and provides an explanation for this puzzling phenomenon by examining the impact of two important drivers of price dispersion: retailer type and consumers' shopping risk. Retailer type refers to whether a retailer is a pure offline, pure online, or dual channel retailer. Shopping risk is defined as the product of consumers' perceived risk of shopping and the transaction uncertainty related to shopping at different types of retailers. A game-theoretic approach is adopted to model consumers' price search and product purchase, as well as price competition within and across retailer types in online and offline markets. Equilibrium pricing strategies are derived for different retailer types competing for different consumer segments with different levels of perceived shopping risk. The impact of retailer type and shopping risk on online versus offline price dispersion are quantified, and conditions when price dispersion is greater online than offline are identified. Results indicate that price dispersion is greater online when the number of pure online retailers is sufficiently large and is increasing in the number of pure online retailers. In addition, a reduction in online shopping risk may actually increase online price dispersion. Results further suggest that even without any online sales, dual channel retailers should maintain their online presence for the purpose of information dissemination, which justifies the importance for pure offline retailer to incorporate webrooming strategies, where consumers can search for prices online but purchase offline.
Online Price Dispersion
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Author : Sulin Ba
language : en
Publisher:
Release Date : 2015
Online Price Dispersion written by Sulin Ba and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with categories.
The Internet has changed the nature of doing business as well as the nature of competition in many industries. Consumers are more empowered than ever with valuable information such as prices, products, and store ratings. Because of this, some researchers even predicted, during the early stage of e-commerce, a frictionless economy in which online prices would be driven down to marginal costs. However, many studies have subsequently observed the wide price dispersion online, and its existence and persistence has now been well documented. Possible explanations of this price dispersion, derived mainly using hedonic price models, have seen only modest success. In this paper, we propose an alternative competitive model, based on online retailers' differentiation, to explain price dispersion. We empirically test the predictions of this model and find that the model is a viable alternative to the hedonic price model. In addition, our competitive model is able to predict and explain observations that are seemingly inconsistent with a hedonic model. Practically, our model yields important recommendations for the online etailing industry and can help an e-tailer to choose a desirable position in the competitive market.
Pricing Behavior And Equilibrium Price Dispersion In Online Markets
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Author : Christine Saliba
language : en
Publisher:
Release Date : 2003
Pricing Behavior And Equilibrium Price Dispersion In Online Markets written by Christine Saliba and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2003 with Electronic commerce categories.
Online markets are characterized by very low price search costs for consumers. This has lead to many claims that online markets should be highly competitive. One would expect that price dispersion would disappear if price search costs were close to zero. Recent empirical studies suggest that price dispersion exists, and is persistent on the Internet. The dissertation sheds some light on the forces driving price dispersion on the Internet and influencing the degree of price competition in online markets. The dissertation consists of two parts, one empirical and two theoretical. The first part is an empirical study of price dispersion in the online market for college textbooks. The second part investigates the role that firm heterogeneity plays in sustaining price dispersion by extending existing theoretical models to allow for varying market share across firms.
Prices And Price Dispersion On The Web
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Author : Karen Clay
language : en
Publisher:
Release Date : 2001
Prices And Price Dispersion On The Web written by Karen Clay and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with E-commerce categories.
Using data collected between August 1999 and January 2000 covering 399 books, including New York Times bestsellers, computer bestsellers, and random books, we examine pricing by thirty-two online bookstores. One common prediction is that the reduction in search costs on the Internet relative to the physical channel would cause both price and price dispersion to fall. Over the sample period, we find no change in either price or price dispersion. Another prediction of the search literature is that the prices and price dispersion of advertised items or items that are purchased repeatedly will be lower than for unadvertised or infrequently purchased items. Prices across categories of books appear to conform to this prediction, with New York Times bestsellers having the lowest prices as a fraction of the publisher's suggested price and random books having the highest prices. Interestingly, price dispersion does not conform with this prediction, apparently for reasons related to stores' decisions to carry particular books. One reason why we may not observe convergence in prices is because stores have succeeded in differentiating themselves even though they are selling a commodity product. We observe differentiation (or attempted differentiation) by a significant number of firms
Online Price Dispersion And The Role Of Information
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Author : Neveen I. Farag
language : en
Publisher:
Release Date : 2002
Online Price Dispersion And The Role Of Information written by Neveen I. Farag and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2002 with categories.
Can Online Price Dispersion Be Explained By Characteristic Differences In Retailers
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Author : Daniel Mazzone
language : en
Publisher:
Release Date : 2016
Can Online Price Dispersion Be Explained By Characteristic Differences In Retailers written by Daniel Mazzone and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2016 with categories.
Economic theory suggests that, due to near-zero online search costs for consumers, price dispersion of homogeneous goods should converge towards zero. However, despite theoretical predictions, price dispersion is pervasive on many online markets. This paper uses econometric tools to analyze a panel data set of prices of best-selling TV models offered by several online retailers as we attempt to pinpoint retailer-specific characteristics that lead to price differentials of identical models. Results suggest that retailers with a national brick-and mortar presence and those that offer full refunds for returned televisions are able to charge higher prices, which can be explained by the fact that customers are willing to pay a price premium for store reputation and returns flexibility. A less intuitive result is that retailers that offer free shipping tend to charge overall lower prices, which can only be explained by logistical and scale advantages.
Online Price Dispersion
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Author : David Bounie
language : en
Publisher:
Release Date : 2014
Online Price Dispersion written by David Bounie and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
Online price dispersion has remained a puzzle for many years. In this article, we test the effects of a range of factors identified in the literature including vendor strategy, market structure, vendor heterogeneity and the time dimension. We use a dataset collected from the Amazon.com, Amazon.uk and the Amazon.fr marketplaces for books, CDs and DVDs from March to November 2006. First, using posted prices, we show that vendors make few modifications to their prices over time (once every 20 to 30 days), and those variations that they do make are relatively small (on average 15 cents). Secondly, we compare posted prices to transaction prices and we show that transaction prices do not necessarily correspond to the lowest posted price but rather centered around the median prices. Thirdly, we show that online price dispersion increases with the number of sellers mainly because new sellers price their product significantly lower that the current median price. Fourth, we show that there is a significant reputation premium of about 10 to 15%. A well established seller can charge a price 10 to 20% higher than the average seller. Our estimation results support the idea that price dispersion is sensitive to the maturity of the market. Consistent with our finding that price dispersion increases with the number of sellers, less mature markets, such as France with fewer sellers, exhibit lower price dispersion. Similarly, we find that large sellers account for a greater proportion of transactions in France than in the U.S. Lastly, we find that public policy can affect price dispersion: a French law limiting discounting on new books results in lower price dispersion in the French book market relative to book markets in the US and UK and relative to the French market for other goods.
Breaking Down Online Price Dispersion
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Author : Shubhsri Rajendra
language : en
Publisher:
Release Date : 2019
Breaking Down Online Price Dispersion written by Shubhsri Rajendra and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2019 with categories.
Price dispersion is defined as a situation where identical, or similar, products are sold by sellers at different prices. In a world without any price dispersion, we would expect homogeneous prices across all sellers especially online since there are essentially no search costs involved. However, that is not what is observed in real life, where products with identical characteristics are sold at varying prices. This paper attempts to break down the cause of this dispersion by analyzing what leads to online price dispersion, how the price of the product is affected by product characteristics, the seller characteristics, market variables etc.
Price Dispersion On The Internet
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Author : Xing Pan
language : en
Publisher:
Release Date : 2014
Price Dispersion On The Internet written by Xing Pan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2014 with categories.
The explosive growth in Internet retailing has sparked a stream of research on online price dispersion, defined as the distribution of prices (such as range and standard deviation) of an item with the same measured characteristics across sellers of the item at a given point in time. In this paper, we review the empirical and analytical literature on online price dispersion and outline the future directions in this research stream. We address the issue of whether price dispersion is greater or smaller online than offline, examine whether price dispersion on the Internet has changed over time, discuss multichannel retailing and measurement of price dispersion, explore why Internet price dispersion exists, and examine the drivers of online price dispersion.
An Examination Of Price Dispersion In An Online Retail Marketplace
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Author : David DiRusso
language : en
Publisher:
Release Date : 2010
An Examination Of Price Dispersion In An Online Retail Marketplace written by David DiRusso and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2010 with categories.
This dissertation is a compilation of three essays that analyze price dispersion in an online retail marketplace. Price dispersion is a measure of the variation in prices that sellers charge for products. Online price dispersion has been thoroughly analyzed in the past decade as it has numerous implications for firm pricing strategy as well as consumer welfare. Chapter 1 of this dissertation offers a literature review of price dispersion research, and discusses key explanations as to why this phenomenon exists on the web. Also, a literature review of shop-bots is presented as they are similar to online marketplaces and form the basis of the three studies. Chapter 2 is the first study, and it establishes the existence of price dispersion in online marketplaces and offers a comparison with price dispersion in shop-bots. It is determined that online marketplaces may have less variation than on shop-bots, yet the price dispersion is still high. Chapter 3 is the second study and it explains much of the dispersion found in the online marketplace through differences in seller service quality and seller reputation. A seller's reputation was found to be the key contributor to variation in the online marketplace hence, study 3, which is chapter 4 of this dissertation, employs an experimental approach designed to offer a perspective of buyers and sellers to determine why price varies with reputation and if consumers value the reputation score. It was determined that buyers prefer sellers with strong long run reputation scores more than sellers with strong short-term reputation scores. Based on these reputation scores sellers want to try to offer a higher price than consumers are willing to pay, and sellers think that a strong score conveys higher levels of trust than buyers believe. This mismatch between how sellers think consumers respond, and how the consumers actually respond could be another driver of price dispersion online. A discussion of the implications of these research studies is offered in Chapter 5.