Re: Price Discrimination on Internet

[enilsson@xxxxxxxxx]

Michael wrote,
> Eric, I'm not sure that the Internet will do much to empower consumers
> relative to sellers . . .

I agree--as I wrote:
  >some have argued that under plausible conditions the
  >ease of comparing prices on the internet can lead to
  >more collusion between firms . . .

Bill wrote,
>I can tell you that the very last thing
>manufacturers and distributors want is a powerful
>piece of software that allows easy side-by-side feature
>and, crucially, price comparison of numerous brands.

But if such a thing does appear, and is widely used, then businesses will
likely find a way to use it for collusive purposes. As it is now some internet
businesses have two prices--that for people who simply go to the site and that
for people who have used a price comparision website. Some businesses have
special pricing posted on these price comparison websites that can only be had
if the buyer manually puts in the lower price posted on the price comparison
website when the buyer goes to the seller's website.

Further, one problem with current price comparison websites is poor
information about availability of the product and/or the quality of service.
Other websites often provide information about quality of service (ease of
returns, quickness of shipments, billing problems, etc), however. For some
reason price comparison and service comparisons are not found in the same
places. A problem exists, however, in the manufacturers and merchants can post
falsely good information about their product/service.

If you are part of some narrow buying community, word-of-mouth often directs
people to good websites. For instance, I will first go to NewEgg for computer
hardware unless compelling reasons exist for going elsewhere. (I came across
them when I built by own computer a number of months ago). But few people are
part of some narrow buying group that provides such a service.

One classic way that manufacturers have dealt with price comparisons (in local
communities) is to produce a large number of minor variations on their
products. In this way, one merchant might have, say, 5 different VCRs by Sony
that are not found anywhere else in a given town. This makes price comparisons
hard. Operating with different brand names is another way to make price
comparisons difficult.

As competition has reduced the number of merchants on the Internet, such
behaviors might undo any benefit that some price comparison website can
possibly provide.

Eric