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Quality-based Price Discrimination: Evidence from Internet Retailers’ Shipping Options

Han Li and Emin Dinlersoz ()

Journal of Retailing, 2012, vol. 88, issue 2, 276-290

Abstract: This paper tests various implications of quality-based price discrimination theory in the context of internet book retailers’ shipping menus. Many internet retailers create quality variants of a homogeneous good by bundling it with several shipping options that differ by delivery time. This practice can allow retailers to extract further surplus from consumers through quality-based price discrimination. We find that the design of shipping menus offered by large retailers is consistent with main implications of quality-based price discrimination theory. Fringe sellers, however, do not appear to engage in price discrimination based on quality.

Keywords: Price discrimination; Online retailing; E-commerce; E-retailing; Shipping; Delivery; Shipping fees; Shipping options; Vertical differentiation (search for similar items in EconPapers)
Date: 2012
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DOI: 10.1016/j.jretai.2011.12.002

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Handle: RePEc:eee:jouret:v:88:y:2012:i:2:p:276-290