Price Comparison and Price Dispersion: Products and Retailers at Different Internet Maturity Stages

Gee-Woo Bock, Sang-Yong Tom Lee, and Hai Ying Li
International Journal of Electronic Commerce,
Volume 11, Number 4, Summer 2007, pp. 101.

Abstract: The Internet can make markets more competitive, but whether this holds for on-line price levels and price dispersion is unclear, perhaps because the maturity, or level of development, of Internet markets has not been widely studied. This paper explores how the maturity of an Internet market affects on-line market pricing in relation to types of products and retailers. It analyzes the pricing differences between pure on-line retailers (e-tailers) and hybrid retailers (multichannel retailers) for three categories of products (books, CDs, digital cameras) in two countries with different levels of Internet maturity (China and the United States). The results show that (1) e-tailer price dispersion is lower in the United States than in China, (2) price levels in the two countries vary with product types, and (3) in both countries, e-tailers have lower price levels and price dispersion than hybrid retailers. These findings suggest that the maturation of Internet markets may lead to lower prices and price dispersion, but with variations dependent on type of product and retailer.

Key Words and Phrases: Click-and-mortar retail, e-tail, e-tail pricing, hybrid retailers, Internet maturity, multichannel retail, price, price dispersion, Web prices.