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The impact of price adjustment costs on price dispersion in E-commerce

René Böheim (), Franz Hackl () and Michael Hölzl-Leitner

No 2019-04, Economics working papers from Department of Economics, Johannes Kepler University Linz, Austria

Abstract: We analyze price dispersion using panel data from a large price comparison site. We use past pricing behavior to instrument for potential endogeneity that might result from the selection of firms to certain product markets. We find that greater price adjustment costs result in greater price dispersion. Although the impact of price adjustment costs on price dispersion became weaker over time, the causal effect of price adjustment costs on price dispersion is still present at the end of the period. Our results are robust to many alternative empirical speciffications. We also test a range of alternative explanations of price dispersion, such as search cost, service differentiation, obfuscation, vertical restraints, and market structure.

Keywords: price dispersion; price adjustment costs; menu costs; e-commerce (search for similar items in EconPapers)
JEL-codes: D40 L11 (search for similar items in EconPapers)
Date: 2019-02
New Economics Papers: this item is included in nep-com, nep-ict and nep-ind
Note: English
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Related works:
Working Paper: The Impact of Price Adjustment Costs on Price Dispersion in E-Commerce (2019) Downloads
Working Paper: The impact of price adjustment costs on price dispersion in E-commerce (2019) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:jku:econwp:2019_04

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