Prices and Price Dispersion in Online and Offline Markets for Contact Lenses

Authors:
James C. Cooper
Working Paper:
283
I examine online and offline prices for popular disposable contact lenses. Idiosyncratic features of this market make it likely that offline firms set prices on the assumption that most of their customers are unaware of online prices. Consistent with lower online search costs, offline prices are more dispersed and approximately 11 percent higher than online prices when controlling for differentiated retail services. I also find that the Internet has had a smaller effect on the prices of widely-advertised lenses. Overall, the results suggest that contact lens consumers still are relatively uninformed about their options.