Abstract
Abstract Using fiction book transactions from Tmall.com, the largest online business-to-consumer (B2C) platform in China, this study comprehensively examines the significant factors that determine online transaction price dispersion rather than posted price dispersion both across stores (inter-store) and within stores over time (inter-temporal). We find large and persistent transaction price dispersion on the Internet, particularly across stores. Price dispersion arises because sellers actively engage in strategic pricing behaviors including loss-leader pricing and dynamic pricing. When consumers face a high risk of mismatched purchases on the Internet market, they place substantial weight on quality signaling factors rather than price when making purchase decisions.
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