PRICE AND PRICE DISPERSION ON THE WEB: EVIDENCE FROM THE ONLINE BOOK INDUSTRY OF TAIWAN

Abstract

We study how the levels of market price and price dispersion are associated with consumersʼ search costs and the level of competitiveness in the online market using data collected from the online book industry in Taiwan. Our empirical results show that prices and price dispersion are lower for books that are more often purchased or advertised. Moreover, we find that the big three bookstores and the fringe bookstores price differently when facing competition from their rivals and that price dispersion tend to be lower with the number of competing bookstores.