A comparison of time-varying online price and price dispersion between multichannel and dotcom DVD retailers

Abstract

We compare price differences and market dynamics between two types of online retailers: online branches of multichannel retailers (OBMCRs) and pure Internet retailers (Dotcoms), based on a set of panel data collected from the DVD market. We find that (i) OBMCRs charge higher prices than Dotcoms, (ii) prices go up with time for both OBMCRs and Dotcoms, and (iii) prices of Dotcoms go up faster than those of OBMCRs.We also find that price dispersions of OBMCRs and Dotcoms are significantly different and the difference decreases with time. Our results show that although the two types of retailers have different price levels and different price dispersions at the beginning, such differences are getting smaller over time, implying that the two types of retailers will have similar pricing behavior in the long run. However, persistent price dispersion among all retailers exists in the market, even over a long period.

How do you feel when you see a list of prices? the interplay among price dispersion, perceived risk and initial trust in Chinese C2C market

“…The obtained results are inconsistent. For example, Pan (2003) finds that multichannel retailers have a lower level of price dispersion than do pure online retailers; while Xing et al, (2006), and Tang & Xing (2001) find a reverse result. The different results may be due to different measurement of price dispersion, product categories, and market differences, etc.…”

“…But many studies repudiate this theory and find that although Internet market evolves as time progresses, price dispersion remains persistent (Pan et al, 2002;Pan, et al, 2004;Ratchford et al, 2003;Xing, et al, 2006).…”

A Study of Price Evolution in Online Toy Market

“…Although Bakos' theory is supported by Smith (2001), and Smith and Brynjolfsson (2001), Harrington (2001) disputed Bakos's results by demonstrating the absence of symmetric pure-strategy equilibrium in which consumers search. Since then, mounting empirical evidence points to the existence of persistent pricing differences in online markets (Pan et al, 2004;Xing et al, 2004;Xing et al, 2006). Theoretically, Baye and Morgan (2001) and Chen and Hitt (2003) both showed that online price dispersion can be an equilibrium outcome of price competition in the Internet markets.…”

“…The rapid development of online retailing has inspired a fast growing research interest in studying the online pricing behaviors (Ancarani and Shankar, 2004;Pan et al, 2004;Xing, et al, 2006). Early studies in the literature mainly focused on comparing price levels and price dispersions between offline and online competitors (Bailey, 1998;Brynjolfsson and Smith, 2000), and among online retailers (Tang and Xing, 2001;Clemons et al, 2002).…”

“…Early studies in the literature mainly focused on comparing price levels and price dispersions between offline and online competitors (Bailey, 1998;Brynjolfsson and Smith, 2000), and among online retailers (Tang and Xing, 2001;Clemons et al, 2002). As online markets become mature and more data on e-tailing become available, empirical studies have shifted from analyzing crosssectional data to longitudinally investigating market dynamics in price levels and price dispersions (Baylis and Perloff, 2002;Lee and Gosain, 2002;Baye et al, 2004aBaye et al, , 2004bXing et al, 2004Xing et al, , 2006Gan et al, 2007). Our study adds to the literature a new research on the pricing behavior and dynamics in the online toy market based on two panel data sets collected over the span of three years (from October 2000 to January 2004).…”