Pricing strategies on the Web

Abstract

Using data collected between August 1999 and January 2000, we examine firm-level pricing strategies for 32 online bookstores. The data cover more than 300 books, including New York Times bestsellers, computer bestsellers, and random books. Over the period, standard deviation of price fell slightly, and prices for the different types of books were substantially above cost and flat or increasing. Thus predicted price convergence has not yet occurred. An average firm priced random paperback nonfiction books at 94 percent of the cover price and offered substantial discounts (19%-6%) for current and former bestsellers on the New York Times list and the Amazon computer list, small (4%) discounts for hardcover books, and substantial (11%) discounts for fiction books. Significant variation in pricing policies across stores, however, suggests that some firms offer differentiated products and that other firms follow dominated pricing policies.