Abstract

Price comparison sites (shopbots) are supposed to create price transparent markets. Nevertheless, online prices are still very dispersed, making the question when and how customers are influenced by price transparency the key for understanding electronic channels. This study is the first empirical investigation of this question using transaction data from the largest online retailer Amazon and a large price comparison site. Based on a unique dataset of 29,667 price and sales figures for 291 products in three product categories, the impact of competitors’ prices on sales is analyzed. We find support for our hypothesis that price comparison is generally more important for the low price products within a product group and less important for the average priced product. Results vary for the highest priced products. The results are translated into practical guidelines for firms trying to optimize their competitive pricing strategy.

Download

Share

COinS
 

When does price transparency matter? – The case of Amazon

Price comparison sites (shopbots) are supposed to create price transparent markets. Nevertheless, online prices are still very dispersed, making the question when and how customers are influenced by price transparency the key for understanding electronic channels. This study is the first empirical investigation of this question using transaction data from the largest online retailer Amazon and a large price comparison site. Based on a unique dataset of 29,667 price and sales figures for 291 products in three product categories, the impact of competitors’ prices on sales is analyzed. We find support for our hypothesis that price comparison is generally more important for the low price products within a product group and less important for the average priced product. Results vary for the highest priced products. The results are translated into practical guidelines for firms trying to optimize their competitive pricing strategy.