NET Institute Working Paper #08-15, September 2008
This paper analyzes the relationship between time spent online by consumers searching for books, and purchases.
This paper reveals customer behavior is important to the book industry. It helps businesses and policy makers understand the book industry and the variables that can affect book sales. General principles about consumer behavior can also be extrapolated, helping policy makers concerned with consumer rights and behavior understand how the consumer acts in this context.
The model provided in this paper used to analyze consumer behavior regarding on- line purchasing of books is based on an assumption counter to other models provided by other theorists.
In contrast to models in which consumers are assumed not to have information about prices, (an unrealistic assumption used to maintain analytical simplicity), the assumption that is made in this paper is that consumers are knowledgeable about the equilibrium price distributions.
That assumption is supported by consumer search patterns in the on-line industry.
Symmetry assumptions as to prices in on-line markets can lead to biased estimates of search cost and possibly measures of price dispersion.
The results of this paper are not based on faulty symmetry assumptions.