The impact of price adjustment costs on price dispersion in E-commerce

Rene Böheim, Franz Hackl, Michael Hölzl-Leitner

Publication: Working/Discussion PaperWU Working Paper

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Abstract

We analyze price dispersion using panel data from a large price comparison site. We use past pricing behavior to instrument for potential endogeneity that might result from the selection of firms to certain product markets. We find that greater price adjustment costs result in greater price dispersion. Although the impact of price adjustment costs on price dispersion became weaker over time, the causal effect of price adjustment costs on price dispersion is still present at the end of the period. Our results are robust to many alternative empirical speciffications. We also test a range of alternative explanations of price dispersion, such as search cost, service differentiation, obfuscation, vertical restraints, and market structure.
Original languageEnglish
Publication statusPublished - 2019

Publication series

NameDepartment of Economics Working Paper Series
No.280

Austrian Classification of Fields of Science and Technology (ÖFOS)

  • 502001 Labour market policy

WU Working Paper Series

  • Department of Economics Working Paper Series

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