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Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales

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dc.contributor.author Brynjolfsson, Erik
dc.contributor.author Hu, Yu (Jeffrey)
dc.contributor.author Simester, Duncan
dc.date.accessioned 2012-11-14T16:19:52Z
dc.date.available 2012-11-14T16:19:52Z
dc.date.issued 2011-06
dc.date.submitted 2007-11
dc.identifier.issn 0025-1909
dc.identifier.issn 1526-5501
dc.identifier.uri http://hdl.handle.net/1721.1/74642
dc.description.abstract Many markets have historically been dominated by a small number of best-selling products. The Pareto principle, also known as the 80/20 rule, describes this common pattern of sales concentration. However, information technology in general and Internet markets in particular have the potential to substantially increase the collective share of niche products, thereby creating a longer tail in the distribution of sales. This paper investigates the Internet's “long tail” phenomenon. By analyzing data collected from a multichannel retailer, it provides empirical evidence that the Internet channel exhibits a significantly less concentrated sales distribution when compared with traditional channels. Previous explanations for this result have focused on differences in product availability between channels. However, we demonstrate that the result survives even when the Internet and traditional channels share exactly the same product availability and prices. Instead, we find that consumers' usage of Internet search and discovery tools, such as recommendation engines, are associated with an increase the share of niche products. We conclude that the Internet's long tail is not solely due to the increase in product selection but may also partly reflect lower search costs on the Internet. If the relationships we uncover persist, the underlying trends in technology portend an ongoing shift in the distribution of product sales. en_US
dc.description.sponsorship MIT Center for Digital Business en_US
dc.description.sponsorship National Science Foundation (U.S.) (Grant IIS-0085725) en_US
dc.language.iso en_US
dc.publisher Institute for Operations Research and the Management Sciences (INFORMS) en_US
dc.relation.isversionof http://dx.doi.org/ 10.1287/mnsc.1110.1371 en_US
dc.rights Creative Commons Attribution-Noncommercial-Share Alike 3.0 en_US
dc.rights.uri http://creativecommons.org/licenses/by-nc-sa/3.0/ en_US
dc.source SSRN en_US
dc.title Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales en_US
dc.type Article en_US
dc.identifier.citation Brynjolfsson, E., Y. Hu, and D. Simester. “Goodbye Pareto Principle, Hello Long Tail: The Effect of Search Costs on the Concentration of Product Sales.” Management Science 57.8 (2011): 1373–1386. en_US
dc.contributor.department Sloan School of Management en_US
dc.contributor.mitauthor Brynjolfsson, Erik
dc.contributor.mitauthor Simester, Duncan
dc.relation.journal Management Science en_US
dc.identifier.mitlicense OPEN_ACCESS_POLICY en_US
dc.eprint.version Author's final manuscript en_US
dc.type.uri http://purl.org/eprint/type/JournalArticle en_US
eprint.status http://purl.org/eprint/status/PeerReviewed en_US
dspace.orderedauthors Brynjolfsson, E.; Hu, Y.; Simester, D. en


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