Pricing Behaviour on the WEB : Evidence from Online Travel Agencies

There have been many claims that the Internet represents a nearly frictionless market. This paper extends the empirical results on online retailing by studying prices for nearly homogenous services - holiday packages - matched across conventional and Internet channels. On first sight, lower average prices in Internet trade appear to signal more intensive price-competition. At the same time, the Internet market place is characterised by greater price dispersion. This rather suggests that search inefficiencies are more significant in electronic trade. It therefore remains an open issue whether Internet trade can be associated with a more competitive market structure than the conventional market.