Working Paper: NBER ID: w9942
Authors: Joel Waldfogel; Lu Chen
Abstract: Investments in brand provide one method for vendors to become known and convince potential customers that vendors will deliver as promised. Alternatively, third-party information on retailers' existence, as well as whether they tend to keep their commitments can serve a similar function and may undermine investments in brand. This study uses a 13-month panel dataset on 1998-99 Internet shopping behavior and use of information intermediaries by over 30,000 households to examine whether information use undermines brand. We find that individuals who take up using price comparison sites reduce their shopping at a broad group of branded retailers by about a tenth. Users of pure price comparison sites, such as DealTime and mySimon, also reduce their Amazon by about a tenth, while individuals using BizRate, which provides both price comparison and vendor reliability information, reduce their Amazon shopping by a fifth. The results have possible implications for both firm strategy and the evolution of market structure. If information weakens the pull of brand, then Internet retailing may grow less concentrated over time.
Keywords: No keywords provided
JEL Codes: F1; N10; O1
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| increased use of price comparison sites (D49) | reduction in shopping at branded retailers (F61) |
| users of pure price comparison sites (D41) | reduction in shopping at Amazon (L81) |
| users of Bizrate (L81) | reduction in shopping at Amazon (L81) |
| presence of information intermediaries (D83) | undermines effectiveness of brand investments (M37) |