A Study of Online Price Dispersion in the Digital Camera Market: Evidence from a US and UK Price Comparison Site (2006)
Online Price Dispersion Dissertation – The failure of the ‘law of one price” has not only been widely observed in traditional high street markets but recent evidence also highlights its total breakdown in online markets as well. In the early days of the Internet era, many had expectations about the possibilities of e-commerce; increased market transparency, lower barriers to entry, lower transaction costs and increased market efficiency. Some even held the extreme view that eventually this would lead to a perfectly competitive market, allowing Bertrand competition to exist whereby the law of one price prevails. Such a market will allow the study of other phenomena without the assumptions relating to perfect competition.
Price dispersion is hardly a new phenomenon. It has been studied exhaustively ever since the seminal paper by Stigler way back in 1961. Despite this fact, there are a number of reasons why research in this area may still prove fruitful. First, although the study of price dispersion has been around since the early 60s, price dispersion on the internet in comparison is in its infancy. Prior to the internet, price dispersion focused on the high street.
There are also a number of reasons why I have chosen to focus on the UK and US markets. Firstly, my familiarity with these countries makes doing the research relatively simpler. Secondly, as these countries are developed, internet usage is greater than other less developed nations. Thirdly, the majority of existing literature on price dispersion focuses on the US market, and to a lesser extent on the UK market, providing me with a wider pool of past research to help support my arguments. Fourthly, the internet comparison site I have used is PriceRunner, which has both a UK and US version.
This makes comparison easier and more accurate. PriceRunner is an up and coming price comparison site, which started in 1999, comparing prices for the Swedish market. Since then, it has grown to several other countries, UK, US, Germany, France, Denmark and Austria. This along with the fact that PriceRunner also compares non-electronic goods provides great scope for further research in the future. Finally, despite the obvious similarities between these two countries, the key difference with regards to internet usage is the fact that the US accounts for a massive 22.8% of total world internet usage, whereas the UK only accounts for a mere 3.69%. It goes without saying that one of the main reasons for this is the contrasting size of population. Nonetheless, this stark difference makes the research more interesting.
- 16,000 words – 60 pages
- Excellent use of literature
- Good analysis of subject area
- well written throughout
- Ideal for finance and accounting student
2. Literature Review