Comparison Pricing and Price Dispersion in the US, Korea and China

Abstract

As an emerging market, the Internet market is developing at an astonishing speed in the latest decade. Many studies on Internet market efficiency have argued. Price dispersion can give expression to low or high of the Internet market efficiency. In general，the cause of price dispersion is incomplete information(Stigler 1961). With Applications of the technology of Internet et al, the new E-commerce market is regard as “frictionless”. So the price dispersion will become narrower than before. This study aims to explore the maturity or the level of development of Internet markets and its effects on online market pricing in relation to different types of products and retailers. We empirically analyze the pricing differences between two kinds of retailers: pure online retailers (e-tailers) and hybrid retailers (multi-channel retailers) for two categories of products: books and CDs. Three countries marked by different Internet maturity levels - Korea, China and the US - are studied. We find that the price levels and price dispersion of e-tailers are lower than those of hybrid retailers in Korea, China and the US. Our findings suggest that, as Internet markets become more developed, they may lead to lower prices and lower price dispersion.