  Low search costs in Internet markets can be used by consumers to find low
prices, but can also be used by retailers to monitor competitors' prices. This
price monitoring can lead to price matching, resulting in dampened price
competition and higher prices in some cases. This paper analyzes price data for
316 bestselling, computer, and random book titles gathered from 32 retailers
between August 1999 and January 2000. In contrast to previous studies we find
no evidence of leader-follow behavior for the vast majority of retailers we
study. Further, the few cases of leader-follow behavior we observe seem to be
associated with managerial convenience as opposed to anti-competitive behavior.
We offer a methodology that can be used by future academic researchers or
government regulators to check for anti-competitive price matching behavior in
future time periods or in additional product categories.
