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- Title
A nearly perfect market?
- Authors
Brynjolfsson, Erik; Dick, Astrid; Smith, Michael
- Abstract
Internet shopbots allow consumers to almost instantly compare prices and other characteristics from dozens of sellers via a single website. We estimate the magnitude of consumer search costs and benefits using data from a major shopbot for books. For the median consumer, the estimated benefit from simply scrolling down to search lower screens is $6.55. This amounts to about 60% of the observed price dispersion and suggests that consumers face significant search costs, even in this “nearly-perfect” market. Price elasticities are relatively high compared to offline markets (−7 to −10 in our base model). Furthermore, contrary to the common assumption, search intensity is not correlated with greater price sensitivity. Instead, consumers who search multiple screens put relatively more weight on non-price factors like brand.
- Subjects
ONLINE shopping; WEBSITES; PRICE sensitivity; CONSUMERS; BRAND choice
- Publication
Quantitative Marketing & Economics, 2010, Vol 8, Issue 1, p1
- ISSN
1570-7156
- Publication type
Article
- DOI
10.1007/s11129-009-9079-7