Internet Auctions and Frictionless Commerce: Evidence from the Retail Gift Card Market

This study investigates the pricing of retail gift cards on eBay. We find substantially less price dispersion than previously documented in other online markets for consumer goods. As gift cards are homogenous goods with clearly defined value, this suggests that greater price dispersion found in other markets may be due to unobservable differences in product characteristics, or from lacking the competitive nature of auction environments. Additionally, gift cards for the discount retailer Wal-Mart exhibit less price dispersion than other large retailers' gift cards, consistent with the perception that greater search by price-sensitive shoppers can lead to less friction in markets.