Price Dispersion and Pricing Strategies for Firms on Amazon.com Open Access

Goldstein, Eve Sarah (2010)

Permanent URL: https://etd.library.emory.edu/concern/etds/f1881m698?locale=en
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Abstract

Abstract
Price Dispersion and Pricing Strategies for Firms on Amazon.com
By Eve Goldstein

Online markets allow consumers to easily compare products, internet retailers and prices with
minimal search costs. Economists have predicted that in this situation there should be perfect
competition, with prices for identical goods set at marginal cost. However this has not occurred,
instead internet markets have large levels of price dispersion. Amazon is an internet retailer,
which facilitates internet sales by other firms. This project studies the market for goods on
Amazon, including pricing strategies of firms, factors that drive pricing decisions and the reasons
why price dispersion exists on Amazon and in internet markets overall. This paper also discusses
methods of differentiation amongst firms, such as reputation, experience, sales, and location on
the webpage, in addition to price. On Amazon, firms can be categorized as "Featured" and "Non-
featured" merchants based on a set of qualifications, which further differentiates retailers. Using
data from Amazon, evidence suggests that there is a relationship between pricing and reputation,
experience, and sales (as they are represented on Amazon), and that being a "Featured" merchant
on Amazon provides exposure and allows the seller to charge a price premium.

Table of Contents

Table of Contents

CONTENTS
1. Introduction ………………………………………………………………………………… 1
2. Literature Review …………………………………………………………………………... 2
3. Theory ……………………………………………………………………………………… 4
4. Data ………………………………………………………………………………………… 7
5. Hypotheses …………………………………………………………………………………. 11
6. Empirical Tests …………………………………………………………………………….. 13
7. Results ……………………………………………………………………………………… 16
8. Discussion and Conclusion ………………………………………………………………... 23
References ……………………………………………………………………………………. 27
Appendix ……………………………………………………………………………………... i

LIST OF TABLES
1. Description of Variables ………………………………………………………… i
2. Summary Statistics ……………………………………………………………… ii
3. Data Correlations …………………………………………………………….. .. iii
4. Results Table- First Set of Models ……………………………………………… iv
5. Results Table- Second Set of Models …………………………………………… v

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