Pricing strategies in online book industry: a comparative study

In this paper, we examine pricing strategies in the U.S. online book industry over two time periods, with an aim to understand whether and how the driving factors of price dispersion change over time. Our empirical results show that dispersion in prices has remained substantial over the period of 2001–2006, but the driving factors of these variations in price have evolved. In 2001 online book retailers generally engaged in obfuscation, frustrating consumer search by manipulating shipping options. As documented by prior literature and revealed in our 2001 data, higher prices charged by retailers were positively related with longer shipping time. This strategy has been abandoned, as shown by our results of a 2006 sample. Online retailers are now competing to ship items quicker than rivals and to pass fewer or no shipping costs on to consumers. The impact of trust assurance seals (e.g., seals of online security and privacy) on price has materialized over the period of 2001–2006. This is because as more consumers become security conscious, the effects of assurance seals on the price becomes better recognized. Moreover, although retailers are roughly clustered into three cohorts, they strategize prices across different product items within each cohort.