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A statistical analysis of product prices in online markets

  • Focus Section on Applications of Physics in Financial Analysis
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Abstract

We empirically investigate fluctuations in product prices in online markets by using a tick-by-tick price data collected from a Japanese price comparison site, and find some similarities and differences between product and asset prices. The average price of a product across e-retailers behaves almost like a random walk, although the probability of price increase/decrease is higher conditional on the multiple events of price increase/decrease. This is quite similar to the property reported by previous studies about asset prices. However, we fail to find a long memory property in the volatility of product price changes. Also, we find that the price change distribution for product prices is close to an exponential distribution, rather than a power law distribution. These two findings are in a sharp contrast with the previous results regarding asset prices. We propose an interpretation that these differences may stem from the absence of speculative activities in product markets; namely, e-retailers seldom repeat buy and sell of a product, unlike traders in asset markets.

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Correspondence to T. Mizuno or T. Watanabe.

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Mizuno, T., Watanabe, T. A statistical analysis of product prices in online markets. Eur. Phys. J. B 76, 501–505 (2010). https://doi.org/10.1140/epjb/e2009-00439-1

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  • DOI: https://doi.org/10.1140/epjb/e2009-00439-1

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