Reputation, Location and Prices in Chinese Electronic Commerce Markets

Dongmei Zhao, Scott Savage () and Yongmin Chen

No 701, Working Papers from China Agricultural University, College of Economics and Management

Abstract: While it is easier to obtain price information online, electronic commerce (e-commerce) may exacerbate information asymmetry about product quality, since the buyer cannot physically inspect the product before purchase. This suggests seller reputation may play a more important role in the online market. As a transition economy, where markets are less developed and state-owned enterprises still play a substantial role, China offers an interesting opportunity to investigate the price effect of seller reputation from a new angle. Using data for 535 identical product items, we find that ownership structure appears to convey an important signal about reputation. Government-owned online retailers (e-tailers) leverage their reputation established in traditional markets into a eleven percent price premium in e-commerce markets. E-tailers with foreign affiliations or without a physical store must discount prices. Results suggest that distance and the e-tailer¡¯s location choice continue to be relevant in e-commerce markets.

Keywords: E-commerce; Reputation; Internet; Location; Prices (search for similar items in EconPapers)
JEL-codes: D40 L51 L81 L86 (search for similar items in EconPapers)
Pages: 34 pages
Date: 2007-04
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http://www.cau.edu.cn/cem/news/newsfj/2007E001pdf First version, 2007 (application/pdf)

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Persistent link: https://EconPapers.repec.org/RePEc:cau:wpaper:0701

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