Internet Enabled Arbitrage: Evidence from the International Textbook Market

This paper addresses an emerging phenomenon in the international online book market and raises questions that are becoming increasingly important to managers in the global e-commerce. Using data from the international online textbook market, this study finds that average prices for equivalent items differ significantly across countries. Even after controlling shipping services by equalizing the shipping time for books, UK online retailers still uniformly offer 22.9 percent lower prices than US online retailers. Applying a conditional logit model to customer choice, this study shows that US customers value foreign offers 10.5 percent lower than domestic offers. There is a 12.4 percent of net price difference between UK and US online retailers after controlling for all other choice-specific characteristics. This price differential can benefit consumers, and can provide profitable opportunities for firms involved at each stage of the book industry.