Abstract
Search costs and consumer heterogeneity are two important explanations for the price dispersion in the brick and mortar (B&M) markets. Comparison shopping agents (CSAs) provide a single click decision support for consumers' purchasing related decision problems and reduce their search costs by providing detail price dispersion related information. Contemporary researchers in IS observe that even with such negligible search costs, price dispersion still continues in the online markets. Consumer heterogeneity and retailer heterogeneity have been agreed upon as two primary explanations for online price dispersions. In this paper, popular CSAs are analyzed to check if they provide complete and accurate price dispersion information. It is shown that because of the selection bias and temporal delay in updating information, contemporary CSAs may not present complete and accurate price dispersion information. In order to reach to an optimal purchasing decision, consumers may have to rely on a sequential search across multiple CSAs or browse through various retailers. This research adds a search cost dimension to explain the continuance of price dispersion in the online markets.
Highlights
The advent of the Internet has provided sellers a cost effective platform to extend their reach beyond any geographical or temporal barriers
If the price dispersion information provided by Comparison shopping agents (CSAs) is incomplete and inaccurate, consumers may have to perform an additional search in order to make informed and optimal purchasing decisions
In order to calculate the temporal delay in updating price information on a CSA, two specific time-based references need to be determined: 1. Price adjustment time (PAT): This is a reference time at which the price of a product is changed by a retailer
Summary
The advent of the Internet has provided sellers a cost effective platform to extend their reach beyond any geographical or temporal barriers. In the absence of complete and accurate price dispersion information, shoppers may pursue their search across multiple CSAs or even various online merchants In this paper, these two phenomena of temporal delay and selection bias are analyzed to provide search cost based explanations for the online price dispersion. Due to selection bias and temporal delay in update, CSAs may present incomplete and inaccurate price dispersion information and may not optimize shoppers’ purchasing decisions without comprehensive search across multiple CSAs or online retailers. If the price dispersion information provided by CSAs is incomplete and inaccurate, consumers may have to perform an additional search in order to make informed and optimal purchasing decisions These additional search costs need to be accounted for and can be one of the potential sources of online price dispersion. There are two specific characteristics of CSAs that creates such possibility of additional search costs
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