Is the internet making retail transactions more efficient? Comparison of online and offline CD retail markets

Ho Geun Lee, Seung Chang Lee, Hae Young Kim, Ran Hui Lee

Research output: Contribution to journalConference articlepeer-review

28 Citations (Scopus)


If a 'perfect market' in economic theory ever comes true in the digital world, sellers will not be able to gain profits above the marginal costs, and the resource allocation will become much more efficient. This paper attempts to investigate whether this prediction is true in the electronic marketplace. We have observed 2000 prices listed by online and offline retailers. By comparing price levels, price adjustment, and price dispersion among CD (compact disc) retailers, we empirically test whether online retail channels are more efficient than conventional retailers. We have found that prices on the Internet are lower than those in conventional outlets. It is also found that Internet retailers adjust their prices by much smaller increments than offline counterparts, in order to flexibly respond to demand and supply conditions. Finally, the price dispersion among Internet retailers is lower than the dispersion among traditional retail stores. Our findings suggest that Internet improves efficiency of markets by lowering costs to obtain and to disseminate information on products and prices.

Original languageEnglish
Pages (from-to)266-277
Number of pages12
JournalElectronic Commerce Research and Applications
Issue number3
Publication statusPublished - 2003
EventSelected Papers from the Pacific Asia Conference on Information (PACIS 2002) - Tokyo, Japan
Duration: 2002 Sept 12002 Sept 1

Bibliographical note

Funding Information:
This work was supported by a research grant from the Yonsei Management Research Center.

All Science Journal Classification (ASJC) codes

  • Computer Science Applications
  • Computer Networks and Communications
  • Marketing
  • Management of Technology and Innovation


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