Analysis On The Relationship Between Service Quality And Price Dispersion In B2C E-Commerce Market

Many research have showed that price dispersion is still widespread existing amonghomogeneous products in electronic market. But whether service quality would be one of theimportant influencing factors, academics have not yet come to a clear and uniformityconclusion. It would be meaningful to give a further analysis on the relationship betweenprice dispersion and service quality in electronic market.This paper first concentrated on the relation of consumer search efficiency, servicequality diversity between e-retailers and price dispersion by formulating a game theoreticmodel. As the model presented, the electronic market will come to a stable situation in whichprice dispersion will not disappear under the influence of the efficiency of consumer searchand the percentage of e-retailers that provide different level of service quality. When there arenot so much high-quality e-retailers, they can take advantage of improving service qualityfurther so as to get a product premium, and the market price would be more dispersed finally.Based on the advice and help of some experts in this area, this paper set up a new B2Ce-retailer service quality evaluating model by Analytic Hierarchy Process. Using this systemwe get a series of evaluating data of9B2C e-retailers in our sample. Combining with theprice data of32homogeneous products, we test the relationship between service quality andprice dispersion by formulating a Two-Way Fixed Effect Model. The empirical resultdemonstrated that service is an important factor generally influencing the market price. Underthe standard of this paper, e-retailer can enjoy a premium of5.76%on the basic-price if onlyit improve its own service quality for1degree. And service quality competition amongdifferent e-retailers has led to price dispersion in electronic market to some degree. Besides,the result also showed that the influence of service quality is diverse among different productcategories. E-retailers should deliberate circumspectly before deciding how to invest on theirservice unless they could control the sales of every category.