  Previous research has directly studied whether on-line retailing is more
competitive than conventional retail markets. The evidence from books and music
CDs is mixed. Here, I use an indirect approach to compare the competitiveness
of on-line with conventional markets. Focusing on the retail market for books,
I identify a peculiarity in the pricing of bestsellers relative to other
titles. Supposing that competitive barriers are lower in on-line retailing, I
analyze how the lower barriers would affect the relative pricing of
bestsellers. The empirical data indicates that on-line retailing is more
competitive than conventional retailing.
