Professor, alumni win econ award
Economics professor Randy Nelson and two alumni, Richard Cohen '00 and Frederik Rasmussen '03, won the 2007-08 Eckstein Prize for their article, "An Analysis of Pricing Strategy and Price Dispersion on the Internet" September 25. The article first appeared in the Eastern Economic Journal in 2007.
The article, which Cohen wrote as his honors thesis, explored price discrepancies for products such as watches, books and electronics among various Internet companies.
"There's this theory in economics that if markets are competitive, all firms should be forced to charge the same price," Nelson said. "But if it's expensive and time consuming to find out what everyone charges, then firms can get away with different prices."
Nelson, Cohen and Rasmussen used the Internet tool ShopBot to compare the costs of several goods and in return found sizeable prices differences.
"For good, after good, after good, we just kept on finding significant price differences over products. You have to wonder how the high price sellers stay in business if you can find a low price manufacturer so quickly," Nelson said.
Nelson and the two students considered factors such as shipping cost as an explanation for the price discrepancies, but found little evidence to support their claim.
"Basically we found that prices that are changed for the same goods on the internet are markedly different, and no one has an explanation why," he said.
The award, named after economist Otto Eckstein, recognizes the best article published in the Eastern Economic Journal every other year. Nelson, Cohen and Rasmussen will receive a plaque and a cash award at a ceremony in Philadelphia Febuary 2010.
Nelson said the e-mail notification he received after winning the award took him by surprise.
"I thought it was a scam email, that's why I read it," he said. "I wasn't familiar with [the award]."
Nelson continues to engage in research with his current students and has published eight papers with student co-authors. Since leaving Mayflower Hill, Cohen received a Masters degree in real estate finance from New York University and now works for Buckingam Properties. Rasmussen, a Harvard Business School graduate, currently works for an Internet company in Boston.
While the process of publishing the article required over a year's worth of research and analysis, Nelson is pleased with the overall experience.
"It's great for the students and I couldn't be happier," he said. "They learn a lot, I enjoy working with them and I think it's great for Colby to get the recognition."