Does price converge on the internet? Evidence from the online DVD market

Abstract

We compare pricing behaviours and market dynamics between online branches of traditional retailers and pure Internet retailers. Our results suggest that the two types of retailers not only will charge similar average prices in the long run, but also will have similar price dispersions. But we find no evidence of price convergence in the market. Brand names make significant differences in both price levels and price dispersions.

Acknowledgement

The work described in this article was supported in part by a grant (No. R-122-000-074-112) from the National University of Singapore.