Activity: Testing the Law of One Price Online

An online price comparison tool shows that an identical, brand-new smartphone model is being sold by various reputable retailers at prices ranging from $750 to $950. Economic theory might predict that intense online competition would force these prices to converge toward a single, lower price. What is the most logical conclusion to draw from the observed range of prices?

Online Retail Pricing Strategy

Explaining Price Differences in Online Markets

The widespread availability of online price comparison tools for a specific, standardized product (like a popular video game) guarantees that all online retailers will eventually sell that product at the exact same price.

Strategic Online Pricing

Economic theory might predict that a standardized product sold online would have a uniform price everywhere due to easy comparison. In reality, prices often vary significantly. Match each factor below to its most likely effect on the range of prices observed for an identical product across different online retailers.

Online Retail Pricing Strategy Decision

Explaining Online Price Variation

The continued existence of a wide range of online prices for an identical, standardized product suggests that many consumers exhibit limited price __________, allowing retailers with different price points to coexist.

Consumer Choice in Differentiated Online Pricing