Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 559: Pricing Strategies in E-Commerce: Bricks vs. Clicks

Richard Friberg (), Mattias Ganslandt () and Mikael Sandström ()
Additional contact information
Richard Friberg: Stockholm School of Economics, Postal: P.O. Box 6501, SE-113 83 Stockholm, Sweden
Mattias Ganslandt: The Research Institute of Industrial Economics, Postal: P.O. Box 55665, SE-102 15 Stockholm, Sweden
Mikael Sandström: Swedish Research Institute of Trade (HUI), Postal: SE-103 29 Stockholm, Sweden

Abstract: What is the impact of the increasing dominance of conventional firms in e-commerce? We use a simple model to show that retailers who only sell through Internet have lower on-line prices than retailers who also sell through conventional stores. This proposition is firmly supported by our empirical analysis which uses a rich data set covering the Swedish markets for books and CDs. On average, prices of these goods are 15 percent cheaper on Internet, but if a single item is bought transport costs will make it as expensive to buy over Internet as in a conventional store (if a basket of goods is bought it is some 10 percent cheaper on Internet since transport costs are fixed).

Keywords: Retail Pricing; Consumer Behavior; E-Commerce; Price Discrimination

JEL-codes: D12; D43; L11; L81

23 pages, June 21, 2001

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