Online Price Dispersion within and between Seven European Countries

This paper provides a comprehensive analysis of online price dispersion in Europe, across a broad range of product categories and countries. Using the dominant European price comparison site we collected firm specific prices, weekly, from sevcn European countries (Denmark, France, Italy, Netherlands, Spain, Sweden and the United Kingdom) for 31 unique products, falling into five distinct product categories (printers, PDAs, scanners, games consoles, computer games and music), over the nine month period October 2001 to June 2002. The resulting data set comprises over 17,000 individual price observations. Using a number of alternative measures of price dispersion we find significant differences in the degree of price dispersion observed in online markets, both between countries and across product categories. We consider alternative explanations for online price dispersion and analyse their significance in explaining the observed differences.

[1]  Allen F. Jung.  Price Variations Among Automobile Dealers in Metropolitan Chicago , 1960 .

[2]  Erik Brynjolfsson,et al.  Frictionless Commerce? A Comparison of Internet and Conventional Retailers , 2000 .

[3]  Dale O. Stahl,et al.  Oligopolistic Pricing with Sequential Consumer Search , 1989 .

[4]  Ramayya Krishnan,et al.  Prices and Price Dispersion on the Web: Evidence from the Online Book Industry , 2001 .

[5]  Austan Goolsbee,et al.  Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry , 2000, Journal of Political Economy.

[6]  David A. Wise,et al.  Price Differences in almost Competitive Markets , 1979 .

[7]  E. Clemons,et al.  The Nature of Competition in Electronic Markets: An Empirical Investigation of Online Travel Agent Offerings , 1999 .

[8]  Aalto-Setälä Ville.  Explaining Price Dispersion for Homogeneous Grocery Products , 2003 .

[9]  Ho Geun Lee,et al.  Do electronic marketplaces lower the price of goods? , 1998, CACM.

[10]  Manfred Kochen,et al.  On the economics of information , 1972, J. Am. Soc. Inf. Sci..

[11]  Michael R. Baye,et al.  Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets , 2001 .

[12]  Sandeep Kapur,et al.  Pricing on the Internet , 2001 .

[13]  H. Varian.  A Model of Sales , 1980 .

[14]  J. Morgan.  Price Dispersion in the Large and in the Small: Evidence from an Internet Price Comparison Site , 2004 .

[15]  Michael R. Baye,et al.  Online Pricing and the Euro Changeover: Cross-Country Comparisons , 2002 .

[16]  Peter A. Diamond,et al.  Consumer Differences and Prices in a Search Model , 1985 .

[17]  J. P. Bailey,et al.  Understanding Digital Markets: Review and Assessment , 2001 .

[18]  Glenn Ellison,et al.  Search, Obfuscation, and Price Elasticities on the Internet , 2004 .

[19]  K. Judd,et al.  EQUILIBRIUM PRICE DISPERSION , 1983 .

[20]  Robert W. Rosenthal,et al.  A Model in Which an Increase in the Number of Sellers Leads to a Higher Price , 1980 .

[21]  Rafael Rob,et al.  Equilibrium Price Distributions , 1985 .

[22]  Joseph P. Bailey,et al.  Intermediation and electronic markets: aggregation and pricing in Internet commerce , 1998 .

[23]  J. Stiglitz,et al.  Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion , 1977 .

[24]  B. Ratchford,et al.  Price competition between pure play versus bricks-and-clicks e-tailers: Analytical model and empirical analysis , 2002, The Economics of the Internet and E-commerce.

[25]  Patrick Scholten,et al.  Price dispersion then and now: Evidence from retail and e-tail markets , 2002, The Economics of the Internet and E-commerce.

[26]  Jennifer F. Reinganum.  A Simple Model of Equilibrium Price Dispersion , 1979, Journal of Political Economy.

[27]  Karen Clay,et al.  Cross-Country Price Differentials in the Online Textbook Market , 2001 .

[28]  Alan T. Sorensen.  Equilibrium Price Dispersion in Retail Markets for Prescription Drugs , 2000, Journal of Political Economy.