Does Information Undermine Brand? Information Intermediary Use and Preference for Branded Web Retailers

Joel Waldfogel, Lu Chen

NBER Working Paper No. 9942
Issued in September 2003
NBER Program(s):Industrial Organization, Law and Economics

Investments in brand provide one method for vendors to become known and convince potential customers that vendors will deliver as promised. Alternatively, third-party information on retailers' existence, as well as whether they tend to keep their commitments can serve a similar function and may undermine investments in brand. This study uses a 13-month panel dataset on 1998-99 Internet shopping behavior and use of information intermediaries by over 30,000 households to examine whether information use undermines brand. We find that individuals who take up using price comparison sites reduce their shopping at a broad group of branded retailers by about a tenth. Users of pure price comparison sites, such as DealTime and mySimon, also reduce their Amazon by about a tenth, while individuals using BizRate, which provides both price comparison and vendor reliability information, reduce their Amazon shopping by a fifth. The results have possible implications for both firm strategy and the evolution of market structure. If information weakens the pull of brand, then Internet retailing may grow less concentrated over time.

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Document Object Identifier (DOI): 10.3386/w9942

Published: Waldfogel, Joel and Lu Chen. “Does Information Undermine Brand? Information Intermediary Use and Preference for Branded Web Retailers.” Journal of Industrial Economics (December 2006).

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