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Free Riding and Sales Strategies for the Internet
Author(s) -
Carlton Dennis W.,
Chevalier Judith A.
Publication year - 2001
Publication title -
the journal of industrial economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.93
H-Index - 77
eISSN - 1467-6451
pISSN - 0022-1821
DOI - 10.1111/1467-6451.00157
Subject(s) - the internet , business , advertising , distribution (mathematics) , marketing , free riding , commerce , control (management) , limit (mathematics) , economics , microeconomics , computer science , incentive , management , mathematics , mathematical analysis , world wide web
For many products, Internet sales can free ride off of the promotional effort exerted by brick and mortar retailers, leading manufacturers to attempt to control the availability and pricing of their products over the Internet. We examine three categories of products: fragrances, DVD players, and side‐by‐side refrigerators. Our evidence suggests that manufacturers that limit distribution in the physical world use various mechanisms to limit distribution online. In particular, these manufacturers generally prevent the sale of their products by Internet retailers that offer deep discounts. Furthermore, manufacturer websites tend to charge high prices, suggesting that manufacturers may internalize free rider issues.