TY  - JOUR
AU  - Carlton,Dennis W.
AU  - Chevalier,Judith A.
TI  - Free Riding and Sales Strategies for the Internet
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 8067
PY  - 2001
Y2  - January 2001
UR  - http://www.nber.org/papers/w8067
L1  - http://www.nber.org/papers/w8067.pdf
N1  - Author contact info:
Dennis W. Carlton
Booth School of Business
University of Chicago
5807 S. Woodlawn Ave.
Chicago, IL 60637
Tel: 847/217-6000
Fax: 312/322-0262
E-Mail: dennis.carlton@chicagobooth.edu

Judith A. Chevalier
Yale School of Management
135 Prospect Street
New Haven, CT  06520
Tel: 203/432-3122
Fax: NA
E-Mail: judith.chevalier@yale.edu
AB  - We examine manufacturers' decisions of whether and how to offer their products for sale over the  internet.  Manufacturers that rely on promotion of their products by brick and mortar retailers must consider the possibility that internet retailers can free ride off of that promotional effort.  This creates an incentive for manufacturers to limit the availability of their products over the internet and to control the pricing of their products over the internet.  We examine three categories of products: fragrances, DVD players, and side by side refrigerators.  Our evidence suggests that manufacturers that limit distribution in the physical world also use various mechanisms to limit distribution online.  In particular, we find evidence that these manufacturers attempt to prevent the sale of their products by online retailers who sell goods at deep discounts.  Furthermore, we show that manufacturers who distribute their goods directly through manufacturer websites tend to charge very high prices for the products, consistent with the hypothesis that manufacturers internalize free rider issues.  While our main focus is on free riding, our evidence on pricing practices is germane to the growing literature on price dispersion on the internet.
ER  -