A Model of Internet pricing under price-comparison shopping

Koçaş, Cenk (2005) A Model of Internet pricing under price-comparison shopping. International Journal of Electronic Commerce, 10 (1). pp. 111-134. ISSN 1086-4415

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An empirical regularity in the price-promotion behavior of retailers of homogenous goods is explained theoretically. Based on this, a model is proposed for price competition in a market for a homogenous good with many asymmetrically positioned retailers. Asymmetry in this context refers to firms having potentially dissimilar loyal and switcher customer numbers that shape their pricing behavior in on-line markets. Incomplete information on the size of these segments results in distinguishable clusters of indistinguishable firms. To analyze these markets, a static game of price competition is developed and solved in an asymmetric oligopoly with numerous clusters of firms. The firms with the smallest ratio of switcher segment size to loyal segment size engage in fierce price competition, whereas the members of all other groups price their goods at reservation price points with no price promotions. This observation is a unique contribution and challenges the perception that all firms in markets for homogenous goods adopt mixed pricing strategies.

Item Type:Article
Uncontrolled Keywords:economic analysis, Internet retailing, loyalty, pricing, Comparison shopping
Subjects:Q Science > QA Mathematics > QA75 Electronic computers. Computer science
ID Code:658
Deposited By:Cenk Koçaş
Deposited On:06 Dec 2005 02:00
Last Modified:27 Oct 2007 13:36

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