Price Dispersion and Convergence in E-commerce Markets

This paper first builds up several models to study price dispersion with different proportions of informed consumers in the market.We analyze the reasons for the existence of price dispersion when searching costs in e-commerce markets are declining.Using a sample of 93 e-commerce websites that cover nine categories of products,535 items,and 6 313 prices,the empirical part of the paper tests the implications of the models.We find that prices have not converged in China's e-commerce markets.There is no monotonic relationship between the share of informed consumers and the degree of price dispersion.Retails' characteristics,especially their market characteristics,are the main driver of price dispersion.