SSE/EFI Working Paper Series in Economics and Finance
No 389:
E-commerce and prices - theory and evidence
Richard Friberg ()
, Mattias Ganslandt ()
and Mikael Sandström ()
Abstract: This paper examines the relation between prices in
conventional stores and on the Internet. Main results from the theoretical
analysis are i) we expect a discrete fall in prices in conventional stores
as the share of the population with access to Internet reaches a critical
level, ii) the relation between prices depends on convenience costs of
shopping in regular stores as well as on transport and navigation costs for
goods bought over Internet, iii) retailers who only sell through Internet
have lower on-line prices than retailers who also sell through conventional
stores. The empirical section employs a rich data set covering the Swedish
markets for books and CDs. Prices of these goods are on average 15 percent
lower on Internet, but if a single item is bought transport costs will make
it as expensive to buy over Internet as in a regular store (if a basket of
goods is bought it is some 10 percent cheaper on Internet since transport
costs are fixed). There is firm support for that retailers who only sell
over Internet have lower on-line prices.
Keywords: retail pricing; consumer behavior; e-commerce; price discrimination; Internet; (follow links to similar papers)
JEL-Codes: D12; D43; L11; L81; (follow links to similar papers)
35 pages, June 18, 2000, Revised September 8, 2000
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