Variety in online grocery shopping drives down prices and boosts competition.
Prices for similar products vary between online grocery stores, leading consumers to search for the best deals. The study looked at how the variety of products affects search costs and price differences. When consumers search for one item, having more variety makes searching easier and leads to higher prices. But when searching for multiple items, variety makes searching harder, leading to lower prices. This means that online grocery stores have more power to set prices when consumers are looking for one item, but prices become more competitive when consumers are looking for multiple items.