Pricing Price Information In E-Commerce

Shopbots and Internet sites that help users locate the best price for a product are changing the way people shop by providing valuable information on goods and services. This paper presents a first attempt to measure the value of one piece of information: the price charged for goods and services. We first establish a theoretical limit to the value of price information for the first seller in a market that decides to sell price information through a shopbot and quantify the revenues that the seller can expect to receive. We also discuss seller competition in selling price information and analyze the equilibria that our model predicts. We then demonstrate how our analysis can be used to argue about the information value and pricing of other product attributes, such as quality. Finally, we drop our model's assumptions to discuss whether and how much of the theoretical value can actually be realized in equilibrium settings, and the practical problems and implications of our ideas. Our results give counterintuitive predictions about the future forms of some electronic markets, including the possible collapse of the free shopbot model