Frictionless Commerce? A Comparison of Internet and Conventional Retailers
Internet retailers charge lower prices and adjust them far more frequently than conventional retailers, yet branding and trust still generate substantial price dispersion online.
Summary
Brynjolfsson and Smith compare pricing behavior between internet and conventional retailers for books and CDs. They find internet prices are 9 to 16 percent lower and price adjustments are up to 100 times more frequent, consistent with lower menu costs online, but price dispersion across internet retailers remains substantial and is driven by differences in brand strength. The study implies that even as digital channels reduce certain frictions
Editor's opinion
A well-known, frequently-cited classic finding by now -- not new enough to earn a place.
Key concepts
Internet retail · Price dispersion · Menu costs