Price Levels and Price Dispersion Within and Across Multiple Retailer Types: Further Evidence and Extension

Abstract

In this article, the authors develop hypotheses on how prices and price dispersion compare among pure-play Internet, bricks-and-mortar (traditional), and bricks-and-clicks (multichannel) retailers and test them through an empirical analysis of data on the book and compact disc categories in Italy during 2002. Their results, based on an analysis of 13,720 prkce quotes, show that when posted prices are considered, traditional retailers have the highest prices, followed by multichannel retailers, and pure-play e-tailers, in that order. However, when shipping costs are included, multichannel retailers have the highest prices, followed by pure-play e-tailers and traditional retailers, in that order. With regard to price dispersion, pure-play e-tailers have the highest range of prices, but the lowest standard deviation. Multichannel retailers have the highest standard deviation in prices with or without shipping costs. These findings suggest that online markets offer opportunities for retailers to differentiate within and across the retailer types.