A similar situation holds for CD s, the authors found. The authors suggest several explanations. They note that consumers may be aware of only one or two Internet retailers for books and CDs and may not seek out better prices among unknown companies. The trust that consumers have for various Internet retailers and the associated value of branding may be another factor. The authors report three major findings about online and conventional retailers in their study.
Internet retailers change prices in smaller increments than conventional retailers.
The smallest observed price change on the Internet was 1 cent while the smallest observed price change by a conventional retailer was 35 cents. There are substantial and systematic differences in prices across retailers on the Internet. At the same time as noted above the dispersion of prices weighted by retailer popularity reveals that Internet markets are highly concentrated, but the retailers with the lowest prices do not receive the most sales. The authors gathered price data, product characteristics, and retailer characteristics for CDs and books sold through Internet and conventional retail outlets. The data includes over 8,500 individual price observations collected from February 1998 to May 1999.