Can Online Retailers Escape the Law of One Price?

  • Francesco D. Sandulli
  • José Ignacio López-Sánchez
Chapter
Part of the Progress in IS book series (PROIS)

Abstract

Early academic research on electronic markets suggested that there are forces driving these markets towards the Bertrand equilibrium where firms set prices equal to unit cost. However, more recent empirical evidence shows that online retailers have been able to develop a number of strategies to escape the Law of one price. This chapter reviews the economic and marketing literature to analyze the strategies that may allow retailers to set prices above marginal costs in Internet markets. More specifically this chapter describes how online retailers use marketing, operations, distribution and communication strategies to avoid perfect competition equilibrium.

Keywords

Electronic markets Bertrand model Frictional costs Price dispersion 

Notes

Acknowledgments

The authors acknowledge and are grateful for the cooperation and financial support provided by the Grant-in-Aid for Scientific Research of Ministry of Science and Innovation, Grant number: ECO2010-19787.

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Copyright information

© Springer-Verlag Berlin Heidelberg 2014

Authors and Affiliations

  • Francesco D. Sandulli
    • 1
  • José Ignacio López-Sánchez
    • 1
  1. 1.Professor of Management, Orange co-Chair on Information SocietyUniversity Complutense of MadridMadridSpain

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