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Jens 'n' Frens
Idle thoughts of a relatively libertarian Republican in Cambridge, MA, and whomever he invites. Mostly political.
"A strong conviction that something must be done is the parent of many bad measures."
-- Daniel Webster
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Thursday, September 11, 2003 :::
Virginia Postrel has a short, interesting piece in today's New York Times.To put it a different way, does every product become a commodity online, driving all prices down so far that they just cover costs? Or can online retailers find ways to make significant sustainable profits? In theory, things could go either way.
Testing the question empirically means doing more than checking the prices listed on Web sites. Just because an online retailer offers a product at a particular price doesn't mean anyone's buying. Researchers need to know how much is actually selling at those prices. And that information is hard to come by.
Enter the Amazon and BN.com ratings. By measuring sales for exactly the same goods at competing sites, the book rankings provide the missing information.
In an article in the June issue of Quantitative Marketing and Economics, Professor Goolsbee and Judith Chevalier, an economist at the Yale School of Management, figured out how to turn the book rankings into sales figures. They then recorded prices and sales for more than 18,000 titles at three points in 2001, when Amazon tested various pricing strategies and BN.com responded. With that information, they examine how price changes at one site affect sales by both that retailer and its competitor. (The paper can be downloaded from http://gsbadg.uchicago.edu/vitae.htm.)
::: posted by Steven at 4:02 PM
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