Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site

Michael Baye, John Morgan and Patrick Scholten
Additional contact information
Patrick Scholten: Bentley College

No 2004-03, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy

Abstract: This paper examines 4 million daily price observations for over 1000 consumer electronics products on the price comparison site Shopper.com. We find little support for the notion that prices on the Internet are converging to the “law of one price.” In addition, observed levels of price dispersion vary systematically with the number of firms listing prices. The difference between the two lowest prices (the “gap”) averages 22 percent when two firms list prices, and falls to 3.5 percent in markets where 17 firms list prices. These empirical results are an implication of a general “clearinghouse” model of equilibrium price dispersion.

Keywords: Bertrand Competition; Internet; Law of One Price; Price dispersion (search for similar items in EconPapers)
JEL-codes: D4 D8 L13 M3 (search for similar items in EconPapers)
Date: 2004
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (230)

Published in Journal of Industrial Economics, 2004

Downloads: (external link)
http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bep ... -morgan-scholten.pdf (application/pdf)

Related works:
Journal Article: PRICE DISPERSION IN THE SMALL AND IN THE LARGE: EVIDENCE FROM AN INTERNET PRICE COMPARISON SITE (2004)
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:iuk:wpaper:2004-03

Access Statistics for this paper

More papers in Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy Contact information at EDIRC.
Bibliographic data for series maintained by Rick Harbaugh ().