Online Retailer Service: IT Features and Price Dispersion (Research Seminar, February 17th, 2004) Neveen Farag-Awad University of Michigan Abstract It has been theorized that the online environment has lower search costs due to the ease of comparing prices across various retailers. However, recent empirical evidence has shown that despite potential lower search costs, prices for a homogeneous good do not converge; instead, price dispersion, the distribution of prices across vendors, is greater online than offline (Smith et al. 2000). It has been argued that access to information facilitated by e-buisness technology has shifted the consumer's role from a passive receiver of products to that of an active member in defining and creating value. Consequently, in order to attract new customers and improve customer loyalty and profitability, firms are utilizing consumer-provided information to more effectively personalize their user's online experience. In the seminar paper, we examine certain features of online service. In particular, we review personalization factors and their association with a firm's ability to charge a price premium. Our empirical examination includes analysis across 79 online retailers for 17 products including books, compact disks (CDs), and personal digital assistants (PDAs). Our results indicate that the implementation of certain user-interaction features and information are positively associated with personalization. An interesting finding is that while product information is negatively associated with an online retailer's price premium, increased personalization is positively associated with price premiums for books and PDAs.