Publication Type

Working Paper

Publication Date

2003

Abstract

We compare the pricing behavior between online branches of traditional retailers (MCR) and pure Internet retailers (Dotcom) in the DVD market. Based on a set of panel data from July 5, 2000 to June 11, 2001, we find that the average price of the MCRs is about 11.2% higher than that of the Dotcoms. Further statistical analyses on the market dynamics of price trends show that the prices of the Dotcoms went up with time much faster than the prices of the MCRs, which points to a possibility that eventually both types of retailers may charge similar prices on average. We also find that the price dispersion among the MCRs is about 74% higher than that among the Dotcoms, and that the price dispersion went down with time for the MCRs and up with time for the Dotcoms. This suggests that the two types of retailers not only will charge similar average prices in the long run, but also will have similar price dispersions. Our methodology of market price evaluation to the online retailer formats directly addresses a fundamental question whether the online markets would evolve toward a perfectly competitive market. The online DVD market seems indeed moving towards such a direction, although significant pricing differentials still exist.

Discipline

Applied Statistics | E-Commerce | Econometrics

Research Areas

Applied Microeconomics

Volume

10-2003

Publisher

Singapore Management University School of Economics and Social Sciences

City or Country

Singapore

Creative Commons License

Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License
This work is licensed under a Creative Commons Attribution-Noncommercial-No Derivative Works 4.0 License.

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