DP6939 Buying Online: Sequential Decision Making by Shopbot Visitors

Author(s): Uwe Dulleck, Franz Hackl, Bernhard Weiss, Rudolf Winter-Ebmer
Publication Date: August 2008
Keyword(s): decision theory, e-commerce, heuristics, price comparison, seller reputation
JEL(s): D83, L81
Programme Areas: Industrial Organization
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=6939

In this article we propose a two stage procedure to model demand decisions by customers who are balancing several dimensions of a product. We then test our procedure by analyzing the behavior of buyers from an Austrian price comparison site. Although in such a market a consumer will typically search for the cheapest price for a given product, reliability and service of the supplier are other important characteristics of a retailer. In our data, consumers follow such a two stage procedure: they select a shortlist of suppliers by using the price variable only; finally, they trade off reliability and price among these shortlisted suppliers.