Tests of Retailer Price Distributions
For a given pair of retailers, our model predicts that the
retailer with a lower SLR should stochastically dominate
the other. The test is based on a distinct rank ordering of the
14 retailers (see Table 3 and Figure 4). However, the SLR
proxy based on aggregate retailer data may lack a high
degree of precision in distinguishing retailers with comparable
SLR values. Therefore, we categorize retailers into
three groups with high, medium, or low SLR values and
compare retailers in different SLR tiers.14 The three
largest retailers have similar SLR values, ranging from
1.00 to 1.17. Using the spread of .17 as a guideline,
1Bookstreet.com and Page One appear to have SLRs that
are relatively close to those of the three large firms, such
that it is empirically difficult to classify either firm as having
a clearly higher or lower SLR. This observation reveals
that four Internet booksellers—Double Discount, Textat-
Cost, eCampus, and a1Books—are small retailers with high
SLRs; here, we expect P1 to hold. There are also five small
retailers—BookVariety.com, Words Worth Books, Varsity,
Worthy, and Sam Goody—with lower SLRs; here, we
expect P2 to hold.