The impact of price adjustment costs on price dispersion in e-commerce

René Böheim, Franz Hackl and Michael Hölzl-Leitner

International Journal of Industrial Organization, 2021, vol. 77, issue C

Abstract: We analyze price dispersion using panel data from a large price comparison site. We use past pricing behavior to instrument for potential endogeneity of firms to select into certain product markets. Our main result is that greater price adjustment costs result in greater price dispersion even in e-commerce markets where price adjustment cost are thought to be negligible. Although the impact of price adjustment costs on price dispersion became weaker over time, the causal effect of price adjustment costs on price dispersion is still present at the end of our observation period. Our results are robust to many alternative empirical specifications. We also control for a range of alternative explanations of price dispersion, such as search cost, service differentiation, obfuscation, vertical restraints, and market structure.

Keywords: Price dispersion; Price adjustment costs; Menu costs; E-commerce (search for similar items in EconPapers)
JEL-codes: D40 L11 (search for similar items in EconPapers)
Date: 2021
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Related works:
Working Paper: The Impact of Price Adjustment Costs on Price Dispersion in E-Commerce (2019)
Working Paper: The impact of price adjustment costs on price dispersion in E-commerce (2019)
Working Paper: The impact of price adjustment costs on price dispersion in E-commerce (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:77:y:2021:i:c:s0167718721000369

DOI: 10.1016/j.ijindorg.2021.102743

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