Academic journal article NBER Reporter

Brynjolfsson and Smith

Academic journal article NBER Reporter

Brynjolfsson and Smith

Article excerpt

Brynjolfsson and Smith analyze the characteristics of the Internet as a channel for two categories of homogeneous products: books and CDs. Comparing pricing behavior at 41 Internet and conventional retail outlets, the authors find that prices on the Internet are 9 to 16 percent lower than prices in conventional outlets, depending on whether taxes, shipping, and shopping costs are included in the price. In addition, they find that Internet retailers' price adjustments over time are up to 100 times smaller than conventional retailers' price adjustments, presumably reflecting lower menu costs in Internet channels. Brynjolfsson and Smith also find that levels of price dispersion depend on the measures employed. When they compare the prices posted by different Internet retailers, they find substantial dispersion: Internet retailer prices differ by an average of 33 percent for books and 25 percent for CDs. However, when they weight these prices by proxies for market share, the dispersion is actually lower in Inter net channels than in conventional channels. This reflects the dominance of certain heavily branded retailers. Brynjolfsson and Smith conclude that, while there is less friction in many dimensions of Internet competition, it is branding, awareness, and trust that remain the important sources of heterogeneity among Internet retailers. …

Search by... Author
Show... All Results Primary Sources Peer-reviewed

Oops!

An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.