Abstract
Price dispersion online is ubiquitous, yet its sources are less well understood. Competing theories suggest that heterogeneity, strategic pricing, or limited attention might drive observed dispersion. Using online field experiments, we investigate consumer choice between two identical firms whose listings differ only in price, in a setting where listings are sorted by price. Of the three theories, only limited attention predicts non-negligible demand at the higher price. Out of 514 sales, 73 were of the higher priced item. Higher priced offers differ both in level and in screen location. When the gap in firm prices was less than 2%, only screen location influenced choice — price itself was irrelevant. For larger gaps, price also influenced choice. Taken together, our results suggest that the importance of limited attention, even for consumers sorting listings by price.
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