Would nature of price competition on internet be different

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Reference no: EM131287166

FINDING THE BEST PRICE: BIZRATE VERSUS EBAY

Economists point to auction Web sites such as eBay as the best means to represent the value of any given product, because the price is determined solely by the value that the consumer attaches to it. That is, the value of the item is accurately reflected in the price paid. Thus, the prices paid for items on eBay must be some of the lowest prices available, right?

Recently, various Internet search engines, such as www.shopzilla.com, www.pricegrabber. com, and www.pricescan.com, have gained popularity. Perhaps one of the most popular is www.bizrate.com. Do auction Web sites or price search engines really give consumers the lowest price? To address this question, we performed searches using both Bizrate and eBay for two specific products: a Sony model DCR-DVD 101 DVD camcorder and a Yamaha receiver, model HTR 5790. At bizrate.com, we found 17 stores that sold the Yamaha receiver at prices ranging from a high of $719 to a low of $495. For the Sony camcorder, we found 51 stores offering it at prices from $800 to $449.

Product	Bizerte		eBay
Product	Low	High	Low	High
Yamaha receiver	$495	$719	$495	$550
Sony DVD camcorder	$449	$800	$480	$774

At eBay, the prices for the Yamaha receiver started at $550 and moved down to $495; the Sony camcorder prices ranged from $774 to $480. Thus, it appears from analyzing these two products alone that the lowest prices are available through both channels, but the high-end prices are lower at eBay. eBay displays similar products together on the same page, which may explain why the range of prices found on eBay is narrower than that on Bizrate.

Questions

1. How has the Internet changed price competition for well-known, branded products?

2. Would the nature of price competition on the Internet be different if we had looked for commodities or esoteric luxury products?

3. Do you think this accessibility to detailed price comparisons has reduced price competition, such that all sellers price at the same level?

4. What assumptions do you tend to make about a product that seems priced very low? Very high?

Reference no: EM131287166

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