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Discontinuities: What is the value of having the lowest price or highest consumer rating on a price comparison website?

Author

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  • Lindgren, Charlie

    (School of Technology and Business Studies, Dalarna University, Falun, Sweden)

Abstract

This paper examines price elasticities on a price comparison website and if there is a discontinuity in demand for retailers having the lowest price, or products having the highest consumer rating. Previous research is extended upon, with a larger, more recent, and more varied dataset, with retailers and products followed over a longer period. It is found that there is a statistically significant positive discontinuity in demand for retailers offering the lowest price. However, the results also show that the magnitude of the effect can vary substantially between product categories. The increase in demand ranges from 58% to 154%, with an average effect of 92%. The results pertaining to consumer ratings are found to be inconclusive. The importance for retailers of maintaining the lowest price therefore remains strong, while consumer ratings seem to have less of an impact on consumer demand.

Suggested Citation

  • Lindgren, Charlie, 2021. "Discontinuities: What is the value of having the lowest price or highest consumer rating on a price comparison website?," HFI Working Papers 19, Institute of Retail Economics (Handelns Forskningsinstitut).
    • Handle: RePEc:hhs:hfiwps:0019
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    More about this item

    Keywords

    Online retailing; e-commerce; price comparison websites; product ratings; lowest price;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L86 - Industrial Organization - - Industry Studies: Services - - - Information and Internet Services; Computer Software

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