Price dispersion under the adverse selection environment in e-commerce markets Online publication date: Tue, 29-Jul-2014
by Yong Pan
International Journal of Services Technology and Management (IJSTM), Vol. 20, No. 1/2/3, 2014
Abstract: The price dispersion means different prices for same goods. In the internet economy, many economists reckon that the price dispersion in the e-commerce markets should descend along with the dropping of search cost. However, the correlative studies reach a contrary opinion: there not only exist price dispersion in the e-commerce market, but also has larger dispersion degree than the traditional market, thereby gaining a 'price paradox' that is inconsistent with traditional economic principle. Based on the adverse selection perspective, this paper wants to provide another interpretation about the price dispersion in the e-commerce markets. Actual data from five online markets in China serves as a case study to help analyse the price dispersion. The results show the different kinds of markets have the different price dispersion that depends on the degree of adverse selection. Finally, the paper probes into resolving approaches eliminating and decreasing price dispersion in order to advance the business efficiency.
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