Can Online Retailers Escape the Law of One Price?

Francesco Sandulli and José Ignacio López-Sánchez ()
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José Ignacio López-Sánchez: University Complutense of Madrid

A chapter in Handbook of Strategic e-Business Management, 2014, pp 187-207 from Springer

Abstract: Abstract Early academic research on electronic markets suggested that there are forces driving these markets towards the Bertrand equilibrium where firms set prices equal to unit cost. However, more recent empirical evidence shows that online retailers have been able to develop a number of strategies to escape the Law of one price. This chapter reviews the economic and marketing literature to analyze the strategies that may allow retailers to set prices above marginal costs in Internet markets. More specifically this chapter describes how online retailers use marketing, operations, distribution and communication strategies to avoid perfect competition equilibrium.

Keywords: Electronic markets; Bertrand model; Frictional costs; Price dispersion (search for similar items in EconPapers)
Date: 2014
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Persistent link: https://EconPapers.repec.org/RePEc:spr:prochp:978-3-642-39747-9_8

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DOI: 10.1007/978-3-642-39747-9_8

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