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Price Dispersion on the Internet: Good Firms and Bad Firms

Authors
  • Baylis, Kathy
  • Perloff, Jeffrey M.
Publication Date
Sep 01, 2001
Source
eScholarship - University of California
License
Unknown
External links

Abstract

Internet firms charge a wide range of prices for such homogeneous products, and high-priced firms remain high-priced and low-priced firms remain low-priced over long periods. One explanation is that high-price firms are charging a premium for superior service. An alternative explanation is that firms price discriminate across informed and uniformed consumers (Salop and Stiglitz 1977) or between serious shoppers and others (Wilde and Schwartz 1979). The pricing pattern for a digital camera and a flatbed scanner is consistent with the price-discrimination model and inconsistent with the service-premium story.

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