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Location still matters: Evidence from an online shopping field experiment

Author

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  • Morgan, John
  • Ong, David
  • Zhong, Zemin (Zachary)

Abstract

Many empirical studies of online price dispersion show that sellers post different prices for homogeneous goods. However, seller heterogeneity is difficult to control for and posted prices may not reflect price dispersion in actual transactions. We contribute to this literature by selling identical simple goods (cell phone credits) at different prices from sellers that were identical except in name and with minimal ratings. The only way consumers could find us in this extremely thick market is to rank by price from lowest to highest. Out of 514 sales, 73 were of the higher priced item, for which we had non-negligible demand even when the price gap was 2%. Thus, even this selected sample of price-sensitive consumers do not necessarily buy the lowest priced item, all else being equal. Using independent variation in screen location and price, we are able to distinguish for the first time between search cost and limited attention based price dispersion.

Suggested Citation

  • Morgan, John & Ong, David & Zhong, Zemin (Zachary), 2018. "Location still matters: Evidence from an online shopping field experiment," Journal of Economic Behavior & Organization, Elsevier, vol. 146(C), pages 43-54.
    • Handle: RePEc:eee:jeborg:v:146:y:2018:i:c:p:43-54
    DOI: 10.1016/j.jebo.2017.11.021
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    1. Grüner Sven, 2020. "Sample Size Calculation in Economic Experiments," Journal of Economics and Statistics (Jahrbuecher fuer Nationaloekonomie und Statistik), De Gruyter, vol. 240(6), pages 791-823, December.

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    More about this item

    Keywords

    Price dispersion; Field experiment; Internet; Electronic market;
    All these keywords.

    JEL classification:

    • C93 - Mathematical and Quantitative Methods - - Design of Experiments - - - Field Experiments
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • M3 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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