The effect of online shopping channels on brand choice,product exploration and price elasticities |
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| Institution: | 1. Department of Economic Sciences, Sapientia Hungarian University of Transylvania, Piata Libertatii 1, Miercurea Ciuc 530104, Romania;2. Department of Business Sciences, Sapientia Hungarian University of Transylvania, Piata Libertatii 1, Miercurea Ciuc 530104, Romania;1. Department of Economics, University of Alberta, Canada;2. Territorial and Sectoral Analysis Laboratory - LATES, Brazil;3. Institute for Applied Economic Research (Ipea), Brazil;4. Department of Economics, University of Brasilia, Brazil;5. National Institute of Science and Technology for Complex Systems (INCT-SC), Brazil;6. Machine Learning Laboratory in Finance and Organizations (LAMFO), Brazil;1. Compass Lexecon, Spain;2. Graduate Institute of International and Development Studies, Geneva, CEPR and Compass Lexecon, Belgium;3. Bergamo University and Compass Lexecon, Italy;1. Toulouse School of Economics: 1, Esplanade de l''Université, Toulouse, 31080, France;2. Università di Bergamo: 2, via dei Caniana, Bergamo, 24127, Italy;3. Luiss: 32, Viale Romania, Roma, 00197, Italy |
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| Abstract: | This paper analyzes the effect of an online shopping channel on private label purchases, product exploration and price elasticities. Variation in the timing that an online shopping service was introduced is utilized as a source of exogenous variation in the decision to shop online. Event study estimates indicate a 0.3 to 1.0 (1.0 to 2.0) percent increase (reduction) in the proportion of private label (new) products purchased after the introduction of the online shopping service. Price elasticities are then estimated utilizing an Exact Affine Stone Index (EASI) demand model. Comparisons of in-store and multichannel price elasticities indicate that households are, on average, less price sensitive when shopping across both the in-store and online channels. Own-price (cross-price) elasticities are 1.07 (5.56) times larger in-store than they are in a multichannel setting. These findings suggest that retailers manipulate the online search platform and(or) the provision of substitutes to favor private label products, which have a higher margin. Additionally, these results suggest that retailers may find it profit maximizing to raise prices as consumer baskets become more sticky in the multichannel purchasing regime. |
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