The impact of price adjustment costs on price dispersion in E-commerce

Böheim, René and Hackl, Franz and Hölzl-Leitner, Michael (2019) The impact of price adjustment costs on price dispersion in E-commerce. Department of Economics Working Paper Series, 280. WU Vienna University of Economics and Business, Vienna.

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Abstract

We analyze price dispersion using panel data from a large price comparison site. We use past pricing behavior to instrument for potential endogeneity that might result from the selection of firms to certain product markets. We find that greater price adjustment costs result in greater price dispersion. Although the impact of price adjustment costs on price dispersion became weaker over time, the causal effect of price adjustment costs on price dispersion is still present at the end of the period. Our results are robust to many alternative empirical speciffications. We also test a range of alternative explanations of price dispersion, such as search cost, service differentiation, obfuscation, vertical restraints, and market structure.

Item Type: Paper
Additional Information: This research was supported by funds from the Oesterreichische Nationalbank (Oesterreichische Nationalbank, Anniversary Fund, project number: 16255).
Keywords: price dispersion, price adjustment costs, menu costs, e-commerce
Classification Codes: JEL D40, L11
Divisions: Departments > Volkswirtschaft
Depositing User: Claudia Tering-Raunig
Date Deposited: 12 Mar 2019 09:42
Last Modified: 22 Oct 2019 00:41
URI: https://epub.wu.ac.at/id/eprint/6861

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