A Comparison of Prices in Electronic Markets and Traditional Markets of China

Abstract

As the largest developing country in the world, China is experiencing fast development in e-commerce, and its online marketplace has rapidly taken shape. In this research, we examine the price levels, menu costs, and price dispersions of books and CDs in China. We collected data from ten online bookstores and eight online CD stores for five weeks. To form a basis of comparison, we also collected data from eight traditional bookstores and eight traditional CD retailers. Our results show that for both products, price levels and menu costs in online markets are significantly lower than those of traditional markets. As for price dispersion, we get two different results. For books, the price dispersion of the online market is larger than that of the traditional market, while the opposite is true for CDs. These results can be explained by the characteristics of the Chinese online marketplace, such as immaturity, unbalanced development, and diversity.

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