Different Prices for Identical Products? Market Efficiency and the Virtual Location in B2C E-Commerce

Julia Häring

No 03-68, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: This paper analyses market efficiency and the role of the virtual location in digital markets using a data set containing more than 23,000 price observations from the online market for contact lenses as well as detailed information about online retailer and product characteristics. The data allow to implement and test the concept of virtual location. The empirical results reveal evidence for lower prices and less price dispersion among e-retailers in comparison to hybrid retailers, which supports the hypothesis of enhanced market efficiency in electronic markets. Furthermore, the results show that an online shop?s virtual location influences its prices and that differences in prices are partially driven by differentiation in retailer service. A decomposition of the price differential reveals that there may indeed be a competition effect.

Keywords: electronic markets; efficiency; virtual location; pricing (search for similar items in EconPapers)
JEL-codes: C23 D43 L11 L81 (search for similar items in EconPapers)
Date: 2003
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:1679

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