When Shopbots Meet Emails: Implications for Price Competition on the Internet

Yuxin Chen and K. Sudhir ()

Quantitative Marketing and Economics (QME), 2004, vol. 2, issue 3, 233-255

Abstract: The Internet has dramatically reduced search costs for customers by using such technologies as shopbots. Email based targeting is relatively inexpensive; the targeting itself can be more precise because firms can better track individual purchase behavior on the Internet. In this paper we address the question: How does the convergence of low search cost for consumers and better targeting ability for firms affect price competition on the Internet? Current theoretical research suggests that both (1) lower search costs and (2) better targeting ability generally lead to more intense price competition. Taken individually, these results would lead us to expect that there will be greater price competition on the Internet due to lower search costs and better targeting. In this paper, we argue that targeting ability increases as search costs fall. Falling search costs can lead to improvements in targeting ability in the form of greater "targeting reach" (the ability to individually address consumers) and "precision" (the ability to distinguish consumers on the basis of their loyalty). We show that the interaction between consumer search and targeting ability can reduce the intensity of competition and raise prices as consumer search and targeting become easier on the Internet.

Date: 2004
References: Add references at CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
http://journals.kluweronline.com/issn/1570-7156/contents (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: When Shopbots Meet Emails: Implications for Price Competition on the Internet (2002)
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:kap:qmktec:v:2:y:2004:i:3:p:233-255

Ordering information: This journal article can be ordered from
http://www.springer. ... ng/journal/11129/PS2

Access Statistics for this article

Quantitative Marketing and Economics (QME) is currently edited by Pradeep Chintagunta

More articles in Quantitative Marketing and Economics (QME) from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().