Was the economics of information approach wrong all the way? Evidence from German grocery r(E)tailing

The economics of information approach suggests that as online retailing matures, information asymmetry will enforce the reduction of price dispersion online as providers will operate in conditions close to perfect competition. The internet has already become a part of our life and shopping experience. In Germany, over 20% of all electronic, media and leisure-related products are bought online. The role of digital channels is expected to increase further, especially in the latecomer sectors. Grocery retailing is one of such sectors still in the making and the share of online players in retail revenues is expected to grow drastically by 2020. Since online food retailing has not been studied thoroughly and little is known about price levels and dispersion between online and offline markets, our study fills this gap by showing that despite the theoretical predictions price dispersion exist both between online and offline grocery providers as well as across online retailers.