Research Note ---Online Price Dispersion: A Game-Theoretic Perspective and Empirical Evidence

Sulin Ba (), Jan Stallaert () and Zhongju Zhang ()
Additional contact information
Sulin Ba: School of Business, University of Connecticut, Storrs, Connecticut 06269
Jan Stallaert: School of Business, University of Connecticut, Storrs, Connecticut 06269
Zhongju Zhang: School of Business, University of Connecticut, Storrs, Connecticut 06269

Information Systems Research, 2012, vol. 23, issue 2, 575-592

Abstract: The existence and persistence of price dispersion for identical products in online markets have been well-documented in the literature. Possible explanations of this price dispersion, derived mainly using hedonic price models, have seen only modest success. In this paper, we propose a competitive model based on online retailers' differentiation mainly in service provided and recognition enjoyed to explain price dispersion. Our exploratory empirical analyses, using cross-sectional data, demonstrate that the competitive model provides a better explanation of the association between prices and online retailers' service and recognition levels. In addition, our competitive model is able to explain observations that are seemingly inconsistent with the hedonic model such as the negative association between service and price. This paper contributes to the literature on price dispersion by offering a differentiation model that provides a good fit with data and by proposing a theory that explains previous counterintuitive observations of prices. Our model also helps an e-tailer to choose a desirable position in the competitive market.

Keywords: online price dispersion; vertical differentiation; e-service; service quality; brand recognition; competitive strategy (search for similar items in EconPapers)
Date: 2012
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

Downloads: (external link)
http://dx.doi.org/10.1287/isre.1110.0353 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:inm:orisre:v:23:y:2012:i:2:p:575-592

Access Statistics for this article

More articles in Information Systems Research from INFORMS Contact information at EDIRC.
Bibliographic data for series maintained by Chris Asher ().