Measuring Prices and Price Competition Online: Amazon and Barnes and Noble / Austan Goolsbee, Judith Chevalier.

By:

Goolsbee, Austan

Contributor(s):

Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w9085.Publication details: Cambridge, Mass. National Bureau of Economic Research 2002.Description: 1 online resource: illustrations (black and white)Subject(s):

L8 - Industry Studies: Services

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Abstract: Despite the interest in measuring price sensitivity of online consumers, most academic work on Internet commerce is hindered by a lack of data on quantity. In this paper we use publicly available data on the sales ranks of about 20,000 books to derive quantity proxies at the two leading online booksellers. Matching this information to prices, we can directly estimate the elasticities of demand facing both merchants as well as create a consumer price index for online books. The results show significant price sensitivity at both merchants but demand at Barnes and Noble is much more price-elastic than is demand at Amazon. The data also allow us to estimate the magnitude of retail outlet substitution bias in the CPI due to the rise of Internet sales. The estimates suggest that prices online are much more variable than the CPI, which understates inflation by more than double in one period and gets the sign wrong in another.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w9085 (Browse shelf(Opens below))	Not For Loan

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July 2002.

Despite the interest in measuring price sensitivity of online consumers, most academic work on Internet commerce is hindered by a lack of data on quantity. In this paper we use publicly available data on the sales ranks of about 20,000 books to derive quantity proxies at the two leading online booksellers. Matching this information to prices, we can directly estimate the elasticities of demand facing both merchants as well as create a consumer price index for online books. The results show significant price sensitivity at both merchants but demand at Barnes and Noble is much more price-elastic than is demand at Amazon. The data also allow us to estimate the magnitude of retail outlet substitution bias in the CPI due to the rise of Internet sales. The estimates suggest that prices online are much more variable than the CPI, which understates inflation by more than double in one period and gets the sign wrong in another.