We test our model’s predictions with two empirical
studies, using pricing data for numerous Internet book
retailers for more than 1600 books. The two studies differ in
how an empirical measure is formed for a retailer’s SLR
(the key variable of the model). The first study is
exploratory, using publicly available descriptive data for the
retailers. The second study uses comScore data of Internet
browsing and purchase data for 100,000 panelists. Compared
with the exploratory study, the panel data study has
the advantage of more directly measuring switching and
loyal behaviors; the disadvantage is that fewer retailers are
represented. The empirical results for both studies confirm
the model’s predictions for retailer pricing based on the
SLR, adding a new perspective to previous studies of dispersed prices (Baye and Morgan 2001; Burdett and Judd
1983; Raju, Srinivasan, and Lal 1990; Salop and Stiglitz
1977).