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Prices and Price Dispersion on the Web: Evidence from the Online Book Industry
Author(s) -
Clay Karen,
Krishnan Ramayya,
Wolff Eric
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 - 10.1111/1467-6451.00161
Subject(s) - price dispersion , competition (biology) , dispersion (optics) , aggregate (composite) , advertising , economics , econometrics , business , microeconomics , ecology , physics , materials science , optics , composite material , biology
Using data collected between August, 1999, and January, 2000, covering 399 books, we examine pricing by thirty‐two online United States‐based bookstores. At the aggregate level, we find that both advertising and competitive structure had the predicted effects. More competition led to lower prices and to lower price dispersion. Holding competitive structure constant, more widely advertised items also had lower prices. At the firm level, we observe considerable heterogeneity in behavior. Firms had differentiated (or attempted to differentiate) on dimensions such as brand, price, and selection.