Jump to ContentJump to Main Navigation
Show Summary Details

Review of Network Economics

Editor-in-Chief: Grzybowski, Lukasz

Ed. by Briglauer, Wolfgang / Goetz, Georg / Pereira, Pedro

4 Issues per year


IMPACT FACTOR 2015: 0.429
5-year IMPACT FACTOR: 0.682

SCImago Journal Rank (SJR) 2015: 0.371
Source Normalized Impact per Paper (SNIP) 2015: 0.719
Impact per Publication (IPP) 2015: 0.580

Online
ISSN
1446-9022
See all formats and pricing
Ahead of print

Issues

Bias and Size Effects of Price-Comparison Platforms: Theory and Experimental Evidence

Aurora García-Gallego
  • Corresponding author
  • LEE and Economics Department, Universitat Jaume I, Av. Sos Baynat s/n, 12006-Castellón, Spain
  • Email:
/ Nikolaos Georgantzís
  • School of Agriculture, Policy and Development, University of Reading (UK) and LEE and Economics Department, Universitat Jaume I, Castellón, Spain
/ Pedro Pereira
  • Autoridade da Concorrência and CEFAGE-UE, Portugal
/ José C. Pernías-Cerrillo
  • Economics Department, Universitat Jaume I, Castellón, Spain
Published Online: 2017-03-03 | DOI: https://doi.org/10.1515/rne-2016-0015

Abstract

We analyze the impact on consumer prices of some information characteristics of price-comparison search platforms. An equilibrium model where vendors compete in prices and consumers do not observe prices, but can obtain price information through a search platform, is developed. The model generates several predictions about the impact on the price distribution of: (i) the size of the search platform’s sample, (ii) whether the search platform’s sample is random, and (iii) the number of vendors in the market. The model’s predictions are tested experimentally. The results confirm the predictions about (ii) and (iii), but reject the model’s predictions about (i).

Keywords: experiments; incomplete information; price competition; search platforms; selective information

JEL Classification: C91; D43; D83; L13

References

  • Armstrong, M., V. Vickers and J. Zhou (2009) “Prominence and Consumer Search,” RAND Journal of Economics, 40(2):209–233.

  • Arnold, M., C. Li, C. Saliba and L. Zhang (2011) “Asymmetric Market Shares, Advertising, and Pricing: Equilibrium with an Information Gatekeeper,” Journal of Industrial Economics, 59(1):63–84.

  • Athey, S. and G. Ellison (2011) Position Auctions with Consumer Search. Quarterly Journal of Economics, 126(3):1213–1270.

  • Bagwell, K. and G. M. Lee (2014) “Number of Firms and Price Competition.” Research Collection School Of Economics, Singapore Management University.

  • Baye, M. and J. Morgan (2001) “Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets,” American Economic Review, 91(3):454–474.

  • Baye, M., D. Kovenock and C. Devries (1992) “It takes Two to Tango: Equilibria in a Model of Sales,” Games and Economic Behavior, 4:493–510.

  • Benaïm, M., J. Hofbauer and E. Hopkins (2009) “Learning in Games with Unstable Equilibria,” Journal of Economic Theory, 144:1694–1709.

  • Bradlow, E. and D. Schmittlein (1999) “The Little Engine that could: Modeling the Performance of World Wide Web Search Engines,” Marketing Science, 19(1):43–62.

  • Brown, J. and A. Goolsbee (2002) “Does the Internet make Markets more Competitive? Evidence from the Life Insurance Industry,” Journal of Political Economy, 110(3):481–507.

  • Brynjolfsson, E. and M. Smith (2000) “Frictionless Commerce? A Comparison of Internet and Conventional Retailers,” Management Science, 46(4):563–585.

  • Burdett, K. and K. Judd (1983) “Equilibrium Price Dispersion,” Econometrica, 51:955–969.

  • Cason, T. N. and D. Friedman (2003) “Buyer Search and Price Dispersion: A Laboratory Study,” Journal of Economic Theory, 112:232–260.

  • Chen, Y. and M. Riordan (2008) “Price-Increasing Competition,” RAND Journal of Economics, 39(4):1042–1058.

  • Clay, K., R. Krishnan, E. Wolff and D. Fernandes (2002) “Retail Strategies on the Web: Price and Non-Price Competition in the Online Book Industry.” The Journal of Industrial Economics, 50(3):351–367.

  • Clemons, E., I. Hann and L. Hitt (2002) “Price Dispersion and Differentiation in Online Travel: An Empirical Investigation,” Management Science, 48(4):534–549.

  • Corniere, A. and G. Taylor (2014) “Integration and Search Engine Bias,” RAND Journal of Economics, 45(3):576–597.

  • Dahlby, B., D. West (1986) “Price Dispersion in an Automobile Insurance Market,” Journal of Political Economy, 94(2):418–438.

  • Dasgupta, P. and E. Maskin (1986) “The Existence of Equilibrium in Discontinuous Economic Games, I: Theory,” Review of Economic Studies, 53:1–26.

  • De los Santos, B., A. Hortacsu and M. Wildenbeest (2013) “Testing Models of Consumer Search Behavior using Data on Web Browsing and Consumer Purchases,” American Economic Review, 102(6):2955–2980.

  • Dinlersoz, E. and P. Pereira (2007) “On the Diffusion of Electronic Commerce,” International Journal of Industrial Organization, 25(3):541–574.

  • Ellison, G. and S. Ellison (2009) “Search, Obfuscation, and Price Elasticities on the Internet,” Econometrica, 77(2):427–452.

  • Ellison, G. and A. Wolitzky (2012) “A Search Cost Model of Obfuscation,” RAND Journal of Economics, 45(3):417–441.

  • Fischbacher U. (2007) “z-Tree: Zurich Toolbox for Readymade Economic Experiments,” Experimenter’s manual. Experimental Economics, 10(2):171–178.

  • Fonseca, M. A. and H. T. Normann (2008) “Mergers, Asymmetries and Collusion: Experimental Evidence,” The Economic Journal, 118:387–400.

  • Frank, R. and D. Salkever (1997) “Generic Entry and the Market for Pharmaceuticals,” Journal of Economic and Management Strategy, 6:75–90.

  • García-Gallego, A., N. Georgantzís, A. Jaramillo-Gutiérrez, P. Pereira and J. C. Pernías (2014) “Monopolistic Product Line Competition with Ex Post Consumer Heterogeneity,” Journal of Business Research, 67(5):795–801.

  • Grabowski, H. and J. Vernon (1992) “Brand Loyalty, Entry and Price Competition in Pharmaceuticals after the 1984 Drug Act,” Journal of Law and Economics, 35:331–350.

  • Guimarães, P. (1996) “Search Intensity in Oligopoly,” Journal of Industrial Economics, 44:415–426.

  • Hagiu, A. and B. Jullien (2011) “Why do Intermediaries Divert Search?” RAND Journal of Economics, 42(2):337–362.

  • Harrison, G. and P. Morgan (1990) “Search Intensity in Experiments.” Economic Journal, 100:478–486.

  • Hopkins, E. and R. Seymour (2002) “The Stability of Price Dispersion under Seller and Consumer Learning,” International Economic Review, 43:1157–1190.

  • Huck, S., Normann, H. T. and J. Oechssler (2004) “Two are few and Four are Many: Number Effects in Experimental Oligopolies,” Journal of Economic Behavior and Organization, 53:435–446.

  • Iyer, G. and A. Pazgal (2000) “Internet Shopping Agents: Virtual Co-Location and Competition,” Marketing Science, 22:85–106.

  • Janssen, M. C. W. and J. L. Moraga-González (2004) “Strategic Pricing, Consumer Search and the Number of Firms,” Review of Economic Studies, 71:1089–1118.

  • Lach, S. (2002) “Existence and Persistence of Price Dispersion: An Empirical Analysis,” The Review of Economics and Statistics, 84(3):433–444.

  • Lawrence, S. and C. Giles (1998) “Searching the World Wide Web,” Science, 280(3):98–100.

  • Lawrence, S. and C. Giles (1999) “Accessibility of Information on the Web,” Nature, 400:107–109.

  • Morgan, J., H. Orzen and M. Sefton (2006) “An Experimental Study of Price Dispersion,” Games and Economic Behavior, 54:134–138.

  • Orzen, H. (2008) “Counterintuitive Number Effects in Experimental Oligopolies,” Experimental Economics, 11(4):390–401.

  • Orzen, H. and M. Sefton (2008) “An Experiment on Spatial Price Competition,” International Journal of Industrial Organization, 26:716–729.

  • Pereira, P. (2005) “Do Lower Search Costs Reduce Prices and Price Dispersion?” Information Economics and Policy, 17(1):61–72.

  • Rosenthal, R. (1980) “A Model in which an Increase in the Number of Sellers Leads to a Higher Price,” Econometrica, 48:1575–1579.

  • Samuelson, L. and J. Zhang (1992) “Search costs and Prices,” Economics Letters, 38:55–60.

  • Schotter, A. and Y. Braunstein (1981) “Economic Search: An Experimental Study,” Economic Inquiry, 19(1):1–25.

  • Seade, J. (1980) “On the Effects of Entry,” Econometrica, 48(2):479–489.

  • Sorensen, A. (2000) “Equilibrium Price Dispersion in Retail Markets for Prescription Drugs,” Journal of Political Economy, 108(4):833–850.

  • Stahl, D. (1989) “Oligopolistic Pricing with Sequential Consumer Search,” American Economic Review, 79:700–712.

  • Stigler, G. (1961) “The Economics of Information,” Journal of Political Economy, 69(3):213–225.

  • Tang, Z., M. Smith and A. Montgomery (2010) “The Impact of Shopbot use on Prices and Price Dispersion: Evidence from Online Book Retailing,” International Journal of Industrial Organization, 28:579–590.

  • Varian, H. (1980) “A Model of Sales,” American Economic Review, 70:651–659.

  • White, A. (2013) “Search Engines: Left Side Quality Versus Right Side Profits,” International Journal of Industrial Organization, 31(6):690–701.

About the article

Corresponding author: Prof. Aurora García-Gallego, LEE and Economics Department, Universitat Jaume I, Av. Sos Baynat s/n, 12006-Castellón, Spain, Phone: +34-964387631


Published Online: 2017-03-03


Citation Information: Review of Network Economics, ISSN (Online) 1446-9022, ISSN (Print) 2194-5993, DOI: https://doi.org/10.1515/rne-2016-0015. Export Citation

Comments (0)

Please log in or register to comment.
Log in