frictionless commerce a comparison of internet and conventional retailers there have been many claims that the internet represents a new nearly frictionless market our research empirically analyzes the characteristics of the internet as a channel for two categories of homogeneous products books and cds using a data set of over 8 500 price observations collected over a period of 15 months we compare pricing behavior at 41 internet and conventional retail outlets we find that prices on the internet are 9 16 lower than prices in conventional outlets depending on whether taxes shipping and shopping costs are included in the price additionally we find that internet retailers price adjustments over time are up to 100 times smaller than conventional retailers price adjustments presumably reflecting lower menu costs in internet channels we also find that levels of price dispersion depend importantly on the measures employed when we compare the prices posted by different internet retailers we find substantial dispersion internet retailer prices differ by an average of 33 for books and 25 for cds however when we weight these prices by proxies for market share we find dispersion is lower in internet channels than in conventional channels reflecting the dominance of certain heavily branded retailers we conclude that while there is lower friction in many dimensions of internet competition branding awareness and trust remain important sources of heterogeneity among internet retailers

price dispersion and seller heterogeneity in retail food markets price dispersion i e a homogeneous product being sold at different prices by different sellers is among the most replicated findings in empirical economics the paper assesses the extent and determinants of spatial price dispersion for 14 perfectly homogeneous food products in more than 400 retailers in a market characterized by the persistence of a large number of relatively small traditional food stores alongside large supermarkets the extent of observed price dispersion is quite high when prices in an urban area where the spatial concentration of sellers is higher are compared with those in smaller towns and rural areas differences in search costs and the potentially higher degree of competition do not yield lower prices other counteracting factors including differences in seller costs and consumer incomes make prices on average higher in the urban area for 11 of the 14 products considered for many but not all the products supermarkets proved to be less expensive than traditional retailers although average savings from food shopping at supermarkets were extremely low finally the results of the study provide evidence that retailers have different pricing strategies and these differences also emerge for supermarkets belonging to the same chain the results presented in the paper suggest that a variety of factors play a role in explaining price dispersion in addition to differences in seller costs the contemporaneous heterogeneity of retailers in terms of services provided and consumers in terms of search costs and preferences makes the emergence of monopolistic competition possible as well as allowing small traditional food retailers to remain in business

buyer search costs and endogenous product design buyer search costs for price are changing in many markets through a model of buyer and seller behavior i consider the effects of changing search costs on prices both when product differentiation is fixed and when it is endogenously determined in equilibrium if firms cannot change product design lower buyer search costs for price lead to increased price competition however if product design is a decision variable lower search costs for price may also lead to higher product differentiation which decreases price competition in this case the overall effect of lower buyer search costs for price may even be higher prices lower social welfare and higher industry profits the result is especially interesting because recent technological changes such as internet shopping can affect the market structure through lowering buyer search costs

price setting in online markets does it click using a unique dataset of daily u s and u k price listings and the associated number of clicks for precisely defined goods from a major shopping platform we shed new light on how prices are set in online markets which have a number of special properties such as low search costs low costs of monitoring competitors prices and low costs of nominal price adjustment we document that although online prices are more flexible than offline prices they nevertheless exhibit relatively long spells of fixed prices large size and low synchronization of price changes considerable crosssectional dispersion and low sensitivity to predictable or unanticipated changes in demand conditions qualitatively these patterns are similar to those observed for offline prices a finding that suggests a need for more research on the sources of price rigidities and dispersion

does information undermine brand information intermediary use and preference for branded web retailers abstract investments in advertising to create brands provide one method for vendors to convince potential customers that vendors will deliver as promised alternatively third party information on whether retailers tend to keep their commitments can serve a similar function and may undermine investments in brand this study uses a 13 month panel dataset on 1998 99 internet shopping behavior and use of information intermediaries by over 30 000 households to examine whether information use undermines brand we find that individuals using price comparison sites such as dealtime and mysimon reduce their amazon shopping by about a tenth while individuals using bizrate which provides both price comparison and vendor reliability information reduce their amazon shopping by a quarter the results have possible implications for both firm strategy and the evolution of market structure if information weakens the pull of brand then internet retailing may grow less concentrated over time we are grateful to the wharton e business initiative webi for financial support

the name your own price channel in the travel industry an analytical exploration name your own price nyop retailers such as priceline offer an alternative distribution channel for service providers in the travel industry such as airlines hotels and car rental companies our research employs an analytical model to identify and understand key trade offs driving the decision by a service provider to employ an nyop channel assuming that such a channel is available this decision requires the existence of forces that counteract the adverse consequences of cannibalization of sales through traditional posted price channels our analysis provides some insight into these forces contracting with the nyop retailer facilitates market segmentation and price discrimination and allows for disposal of excess capacity after meeting business travel demand however the cost of this flexibility is that the service provider can no longer credibly precommit to maintaining high prices when there is unsold capacity also when contracting with an independent retailer the service provider is unable to extract the entire revenue generated from nyop consumers a key insight from our model is that the rationale for contracting with an nyop retailer is driven by the uncertainty in business travel demand not the expectation of excess capacity indeed all else equal the larger the capacity the less likely it is that contracting with an nyop retailer is the right decision on the part of the service provider

product variety informative advertising and price competition abstract in many product categories consumer tastes are diverse and firms use finely targeted advertising to inform consumers about their products this article proposes a model of informative advertising that allows for diverse consumer tastes and multiple competing firms using this framework the authors analyze how diversity in consumers tastes informative advertising and improvements in advertising technology may influence prices first informative advertising can lead to lower prices if consumer valuations are high however if consumer valuations are low informative advertising can lead to higher prices second when consumer valuations are high price increases with greater diversity in tastes though this result reverses if consumer valuations are low third improvements in advertising technology lead to higher levels of advertising when consumer valuation is high but the opposite effect can occur when consumer valuation is low the authors relate these theoretical findings to previous e

price dispersion and loss leader pricing evidence from the online book industry in this paper we develop a theoretical model to analyze the pricing strategies of competing retailers with asymmetric cross selling capabilities when product demand changes our results suggest that retailers with better opportunities for cross selling have higher incentives to adopt loss leader pricing on high demand products than retailers with low cross selling capabilities as a result price dispersion of a product across retailers rises when its demand increases the predictions of our model are consistent with the empirical evidence from the online book retailing industry using product breadth as a proxy for cross selling capability we find that retailers with high cross selling capabilities reduce prices on best sellers more aggressively than retailers with low cross selling capabilities as a result price dispersion increases when a book makes it to the best seller list and the increase is mainly driven by the difference in pricing behavior between retailers with different cross selling capabilities our empirical results are robust against a number of alternative explanations

search and collusion in electronic markets we examine the impact of reduced search costs on prices of commodity products in electronic marketplaces conventionally reduced consumer search costs may be expected to engender stronger price competition between firms resulting in lower prices and improved consumer welfare this notion was formalized in stahl 1989 oligopolistic pricing with sequential consumer search american economic review vol 79 no 4 pp 700 712 in a model of static firm competition in this paper we show that these standard welfare conclusions may be neutralized or reversed in a dynamic environment we focus on self enforcing collusion by firms and characterize the conditions under which collusive equilibria exist we show that less costly consumer search can facilitate firms abilities to collude resulting in higher prices and reduced consumer welfare even with imperfect or no monitoring by sellers of each other s prices if the same technology that eases consumer search also allows firms to monitor each other s prices more easily then firms can more easily detect cheating on a collusive price arrangement allowing an even greater scope for collusion this raises antitrust concerns with respect to the electronic marketplace and suggests that at least some of the anticipated competitive gains from electronic market systems may be difficult to realize

using price distributions to estimate search costs we show how the equilibrium restrictions implied by standard search models can be used to estimate search cost distributions using price data alone we consider both sequential and nonsequential search strategies and develop estimation methodologies that exploit equilibrium restrictions to recover estimates of search cost heterogeneity that are theoretically consistent with the search models we illustrate the method using online prices for several economics and statistics textbooks

dynamic conversion behavior at e commerce sites this paper develops a model of conversion behavior i e converting store visits into purchases that predicts each customer s probability of purchasing based on an observed history of visits and purchases we offer an individual level probability model that allows for different forms of customer heterogeneity in a very flexible manner specifically we decompose an individual s conversion behavior into two components one for accumulating visit effects and another for purchasing threshold effects each component is allowed to vary across households as well as over time visit effects capture the notion that store visits can play different roles in the purchasing process for example some visits are motivated by planned purchases while others are associated with hedonic browsing akin to window shopping our model is able to accommodate these and several other types of visit purchase relationships in a logical parsimonious manner thepurchasing threshold captures the psychological resistance to online purchasing that may grow or shrink as a customer gains more experience with the purchasing process at a given website we test different versions of the model that vary in the complexity of these two key components and also compare our general framework with popular alternatives such as logistic regression we find that the proposed model offers excellent statistical properties including its performance in a holdout validation sample and also provides useful managerial diagnostics about the patterns underlying online buyer behavior

theory and evidence on pricing by asymmetric oligopolies we present an analysis of markets with many asymmetrically positioned retailers that compete for the business of both informed and uninformed customers for a homogenous good such as software music book or a brand name appliance we show that two forms of asymmetry one related to loyal segment sizes of retailers and one related to the positioning of firms completely explain the observed price dispersion in such markets and the multitude of asymmetrical strategies adopted by retailers the stochastic dominance of empirical mixed strategy measures is used to test the theory with data on 968 books from 10 online retailers

on the competitive effects of price matching policies abstract this paper challenges the conventional wisdom that price matching policies lead to supracompetitive prices by reducing firms incentives to undercut rivals i argue that price matching and price beating policies are more appropriately viewed as a means of price discrimination and develop a model that demonstrates their use as such analysis of this model shows that in contrast to the results of the existing literature price matching and price beating may raise or lower equilibrium prices relative to the equilibrium in which firms may not adopt such policies

dynamic pricing of inventory capacity with infrequent price changes we consider a problem of dynamically pricing a single product sold by a monopolist over a short time period if demand characteristics change throughout the period it becomes attractive for the company to adjust price continuously to respond to such changes i e price discriminate intertemporally however in practice there is typically a limit on the number of times the price can be adjusted due to the high costs associated with frequent price changes if that is the case instead of a continuous pricing rule the company might want to establish a piece wise constant pricing policy in order to limit the number of price adjustments such a pricing policy which involves optimal choice of prices and timing of price changes is the focus of this paper we analyze the pricing problem with a limited number of price changes in a dynamic deterministic environment in which demand depends on the current price and time and there is a capacity inventory constraint that may be set optimally ahead of the selling season the arrival rate can evolve in time arbitrarily allowing us to model situations in which prices decrease increase or neither we consider several plausible scenarios where pricing and or timing of price changes are endogenized various notions of complementarity single crossing property supermodularity and total positivity are explored to derive structural results conditions sufficient for the uniqueness of the solution and the monotonicity of prices throughout the sales period furthermore we characterize the impact of the capacity constraint on the optimal prices and the timing of price changes and provide several other comparative statics results additional insights are obtained directly from the solutions of various special cases

measuring the frictional costs of online transactions the case of a name your own price channel we study the offers submitted by consumers to a large name your own price nyop online retailer a distinctive feature of this retailer is that it allows consumers to repeatedly submit offers on one and the same product while consumers could identify the threshold price the minimum price for which the retailer is willing to sell by incrementing their offer in small steps in each consecutive round such a strategy would require them to go through many additional online transactions we define frictional cost as the disutility that the consumer experiences when conducting an online transaction such as submitting an offer thus in our setting consumers trade off a direct financial value lower price for frictional costs based on a consumer choice model capturing this trade off we use the observed consumer behavior to reconstruct the frictional cost parameters for the consumers in our sample we show that perhaps contrary to the general wisdom frictional costs in electronic markets are substantial with median values ranging from eur 3 54 for a portable digital music player mp3 to eur 6 08 for a personal digital assistant pda we find that consumers who have gathered experience with the nyop channel in previous transactions exhibit lower frictional costs than consumers who use the channel for the first time surprisingly sociodemographic variables do not help to explain the variation in frictional costs

search costs and equilibrium price dispersion in auctions a leading explanation for price dispersion in posted price markets is search costs we incorporate this insight into a model of competing second price auctions similar to ebay by doing so we extend the narrow literature on competing auctions to capture price dispersion and grow the already large literature on price dispersion to include auctions we provide evidence on search costs and price dispersion using data collected from ebay identifying search costs by exploiting a discontinuity in the visibility of auctions due to ebay s search tool 1 we thank aaron bodoh creed greg lewis steve tadelis and various seminar participants for helpful comments nate woody for programming assistance and the cornell university institute for social sciences for financial support the views expressed herein are solely those of the authors and do not necessarily reflect those of the u s department of justice 1

price dispersion in the small and in the large evidence from an internet price comparison site this paper examines four million daily price observations for more than 1 000 consumer electronics products on the price comparison site http shopper com we find little support for the notion that prices on the internet are converging to the law of one price in addition observed levels of price dispersion vary systematically with the number of firms listing prices the difference between the two lowest prices the gap averages 23 per cent when two firms list prices and falls to 3 5 per cent in markets where 17 firms list prices these empirical results are an implication of a general clearinghouse model of equilibrium price dispersion

can price dispersion be persistent in the internet markets we investigate pricing behaviour and market dynamics for both online branches of multi channel retailers mcrs and online only retailers dotcoms based on a set of panel data collected for 2 years in the online dvd market we find that prices of mcrs and dotcoms both go down with time but prices of mcrs decrease in a significantly faster speed implying that difference in the average prices between the two types of retailers is getting smaller with time we also compare the price dispersion and its dynamics between mcrs and dotcoms we find that the price dispersion among mcrs is much bigger than that among dotcoms at the beginning but such a difference gets smaller with time as the price dispersion among dotcoms becomes bigger our results suggest that the two types of retailers will not only charge similar average prices in long term but also have similar price dispersions but our findings show that price dispersion among all retailers goes up with time indicating that prices do not converge in

search and price competition abstract this paper qualifies and quantifies what is meant by higher price level and dispersion in an oligopoly market with imperfectly informed consumers for both fixed sample search and sequential search the objective is to identify the conditions under which prices become lower and price dispersion reduces as a function of consumers information surprisingly the mean price is an increasing function of search intensity and price dispersion is an inverse u shaped function of the proportion of informed consumers

inflation price competition and consumer search technology abstract this paper studies an s s pricing model in the presence of inflation and price competition in search markets i present a model in which consumers search technologies can influence firms price setting price dispersion and the market structure the result obtained shows that although price competition among firms is intensified in markets where consumers search technologies are more efficient price inflation is counter intuitively more likely to increase the monopoly power and stimulate entry of firms in these markets the model also provides new empirical implications for firms price setting behaviors

ask prices offers and time to sale in an online exchange i introduction in this article we consider the role served by the ask price posted by sellers in an online exchange for used computers the functional role served by the ask price in this exchange is similar to that in other bilateral exchange settings the ask price is not binding and essentially serves as a starting point for negotiations furthermore every offer that we observe by buyers lies well below the ask price this type of bargaining institution is common in online marketplaces and also in markets for used cars housing and goods sold through want ads placed in newspapers the general finding of empirical literature examining these other markets is that ask prices convey information a high ask price may indicate a desire by the seller to hold out for a higher offer in such a setting ask price dispersion may arise if sellers trade off higher prices against the likelihood of making a sale high ask prices will then lead to higher sale prices on average but longer time on the market the standard justification for the inverse relationship between ask prices and time on the market is that a seller asking a high price will receive fewer offers if search by buyers is costly most of the existing findings in support of this view have focused on real estate markets as an empirical matter it is not clear that ask prices should play a similar role in the online setting that we examine although the notion that sellers have differing reservation prices seems plausible if the market is characterized by perfect information and costless search then ask prices will serve no functional role this is important because there is a general anecdotal view that online markets serve as sufficiently effective mechanisms for information transmission that search is costless in such a setting an initial ask price posted by the seller would be irrelevant one caveat to this view is that although information is readily available online it may be costly to process the used computers sold on this exchange are complex products that differ on a number of dimensions viewing the large amount of information available and forming an estimate of willingness to pay in such a situation is a nontrivial task though the cost in terms of time and effort required to process this information does not fall as neatly within the imperfect information paradigm as does the housing market it is clearly analogous the search costs involved in visiting and walking through a house for sale are substantial but relative to the value of the house they may be no larger than the costs of viewing and assessing the characteristics of a used computer it is possible then that the immediate access to information online may not eliminate search costs one contribution of our research therefore is an assessment of the extent to which online markets can be thought of as search markets our approach is to see whether the relationship between ask prices offers and time to sale on the exchange is similar to that in other markets characterized by costly search our data differ in some key ways from that available in more traditional settings for example data regarding the number of offers a given property receives are rarely available in housing markets nor in many cases is the sequence of offers for a given property observable in our case we observe the number of offers made and the level of each offer a disadvantage of our data is that we do not observe final transaction prices because once computers are sold they are removed from the publicly available listings on the exchange thus we cannot directly estimate the relationship between ask prices and sale prices we can however estimate the relationship between the ask price and the level of the highest outstanding i e rejected offer that the computer received this allows us to test the implication that sellers with high ask prices are more likely to reject offers of a given level

information exchange and distributional implications of price discrimination with internet marketing in agriculture a price discrimination model is proposed to explain why firms provide extraneous information on internet sites selling agricultural inputs whether an informative site is offered depends on price discrimination potential which depends on how much farmers reveal heterogeneity by internet behavior price discrimination is greater if information benefits are negatively correlated with farm size or other characteristics explaining why extraneous not product related information is offered on internet sales sites price discrimination adversely affects some farmers but may be beneficial on average because it generates free information outcomes depend on whether internet users are aware of price differentials on the basis of clickstream information

technological advances transaction costs and consumer welfare consumers incur many transaction costs in purchasing and using most products this paper examines the effects of a reduction in such consumer transaction costs caused by market level technological advances using a model in which consumers are simultaneously heterogeneous in their transaction costs and in their marginal valuations of product quality this paper highlights two mechanisms that can cause such reductions in consumer transaction costs to lower consumer surplus and reduce consumer share of the total social surplus specifically market level technological advances reduce different consumers transaction costs by different amounts and increase their reservation prices by different amounts which can lead to i product design changes that many current consumers do not like and ii homogenization in consumer reservation prices that allows a seller to extract more surplus through its pricing policy this paper also shows that consumers may be better off with seller induced higher consumer transaction costs finally the paper shows how depending on the nature of the quality production process such reductions in consumer transaction costs can either lower or raise product qualities and consumer prices

measuring the effects of search costs on equilibrium prices and profits abstract this paper assesses the effects of search costs on equilibrium prices and profits using an estimated model of demand and costs in a laundry detergent market i find that some firms profits initially rise and then fall with search costs overall the magnitude and direction of the search costs effects on prices and profits are heterogeneous this is because search costs create conflicting incentives for a firm to reduce prices to attract the attention of searching consumers yet also raise prices to harvest profit from consumers who are unaware of competing products these effects can vary with the relationship between the firms actual prices and the consumers pre search beliefs about prices

search and price dispersion in online grocery markets abstract consumers often purchase multiple products at a time from retailers creating multi product incentives for search in this paper we consider how product variety affects consumer search intensity and the dispersion of prices in multi product retail markets we employ online grocery pricing data from four large retailers in the uk to estimate search costs and equilibrium price dispersion for food products under circumstances where i consumers search for single products and ii consumers search for multiple products at once we compare estimates in each case between a model in which utility increases with product variety and a model in which utility is not a function of variety relative to our preferred specification with variety effects in utility we find estimates of both search cost and search frequency to be biased upwards in single product settings when variety effects are ignored however we find estimates of search costs are biased upwards while search frequency is biased downwards in multi product settings when variety effects in utility are ignored

mixed pricing in oligopoly with limited monopoly we analyze price competition between two brands buyers consist of switchers and two segments of customers with limited brand loyalty we identify a unique symmetric mixed strategy price equilibrium and find that competition is most relaxed when there exists some switchers

modeling the search for the least costly opportunity abstract with the continuing growth in the number of opportunities available at virtual stores over the internet there is also a growing demand for the services of computer programs capable of scanning a large number of stores in a very short time we assume that the cost associated with each scan is linear in the number of stores scanned and that the resulting list of price quotes is not always satisfactory to the customer in which case an additional scan is performed and so on in such a reality the customer wishing to minimize her expected cost must specify the requested sample size and a rule control limit to stop the search in the context of search theory the above search model can be categorized as fixed sample size sequential with infinite horizon according to this model the expected search cost is a function of two decision variables the sample size and the control limit we prove that for arbitrary sample size the expected search cost is either quasi convex or strictly decreasing in the control limit and that the optimal expected search cost is quasi convex in the sample size these properties allow an efficient calculation of the optimal policy we also develop analytic formulas to calculate the cost s variance allowing customers to choose a slightly higher expected cost if there is a considerable decrease in the variance finally we present detailed examples for price quotes that are distributed uniformly or exponentially

comparison friction experimental evidence from medicare drug plans consumers need information to compare alternatives for markets to function efficiently recognizing this public policies often pair competition with easy access to comparative information the implicit assumption is that comparison friction the wedge between the availability of comparative information and consumers use of it is inconsequential because information is readily available and consumers will access this information and make effective choices we examine the extent of comparison friction in the market for medicare part d prescription drug plans in the united states in a randomized field experiment an intervention group received a letter with personalized cost information that information was readily available for free and widely advertised however this additional step providing the information rather than having consumers actively access it had an impact plan switching was 28 percent in the intervention group versus 17 percent in the comparison group and the intervention caused an average decline in predicted consumer cost of about 100 per year among letter recipients roughly 5 percent of the cost in the comparison group our results suggest that comparison friction can be large even when the cost of acquiring information is small and may be relevant for a wide range of public policies that incorporate consumer choice

price dispersion and inflation evidence from israel the paper considers the question whether observed price differentials reflect perceived differences in quality service agreements or location or whether information imperfections can explain this phenomenon it sets out theoretical arguments linking inflation to reductions in the information stock held by agents and thus to greater price dispersion the hypothesis is tested using monthly price data for 13 uniquely defined goods sold in israel between 1971 and 1984 price dispersion is shown to be positively related to the rate of market price inflation since inflation is an unlikely proxy for changes in perceived characteristics the findings support price dispersion theories based on optimally imperfect decision making

price dispersion in the lab and on the internet theory and evidence price dispersion is ubiquitous in settings that closely approximate textbook bertrand competition we show that only a little bounded rationality among sellers is needed to rationalize such dispersion a variety of statistical tests based on datasets from two independent laboratory experiments and structural estimates of the parameters of our models suggest that bounded rationality based theories of price dispersion organize the data remarkably well evidence is also presented to suggest that the models are consistent with data from a leading internet price comparison site

lessons about markets from the internet many of us have grown used to tired of and finally downright skeptical of claims of the transformative powers of the internet it was to usher in the new economy but we seem mostly to have the old it would transform retail but toys r us has outlasted etoys frictionless commerce would be the norm but plenty of friction still exists the internet was also claimed to require a whole new economics with all new laws while this too was very far from the truth existing theories have mostly done quite well the internet has had a substantial effect on economic thought in this paper we discuss some ways in which the internet has affected how economists think about markets

price dispersion in an automobile insurance market from automobile insurance data for alberta over the period 1974 81 we find thatpremiums are highly correlated across driver classes in a given year but that premiums for a given driver class are not correlated over a period of more than 5 years firms relative market shares among drivers over age 25 and married males under 25 are inversely related to their deviations from the mean premiums in these driver classes the variance of real premiums decreases with the numberof firms in the market and increases with the real loss cost per car insured and the number of cars insured from these results we conclude that the price dispersion in automobile insurance in alberta is based on costly consumer search

low cost airlines and online price dispersion abstract this paper presents a new form of online pricing tactic where airlines post at the same time and for the same flight fares in different currencies that violate the law of one price unexpectedly for an online market price dispersion may be accompanied by a hidden discount that tends to persist in the period preceding a flight s departure the econometric analysis reveals that airlines post dispersive fares in less competitive routes with more heterogeneous demand furthermore temporal persistence of intra firm fare dispersion suggests that it is an equilibrium phenomenon engendered by the airlines need to manage stochastic demand conditions for a specific flight

in a world without borders the impact of taxes on internet commerce the rapid rise in sales over the internet and the fact that most internet buyers pay no sales tax has ignited a considerable debate over taxes and the internet this paper uses new data on the purchase decisions of approximately 25 000 online users to examine the effect of local sales taxes on internet commerce the results suggest that controlling for observable characteristics people living in high sales taxes locations are significantly more likely to buy online the results are quite robust and cannot be explained by unobserved technological sophistication shopping costs or other alternative explanations the magnitudes in the paper suggest that applying existing sales taxes to internet commerce might reduce the number of online buyers by up to 24 percent

oligopolistic pricing with heterogeneous consumer search abstract a finite number of identical stores sell a homogeneous good to consumers with heterogeneous search costs who search sequentially with perfect recall and without replacement consumers search rules are optimal with respect to the stores pricing strategies and consumers must visit a store to obtain information about its actual price a symmetric nash equilibrium sne always exists the model exhibits a variety of equilibrium behaviors between monopoly pricing and marginal cost pricing the competitiveness of a market depends crucially on the shape of the search cost distribution moreso than on the number of competing firms

oligopolistic pricing with sequential consumer search n identical stores compete by choosing prices for a homogeneous good with constant marginal costs consumers search sequentially with perfect recall for the lowest price one class of consumers called shoppers have zero search costs while all other consumers have a positive search cost c there is a unique symmetric nash equilibrium price distribution with the property that it changes smoothly from marginal cost pricing when all consumers are shoppers and or c 0 and monopoly pricing when no consumers are shoppers remarkably as the number of stores increases the nash equilibrium becomes more monopolistic copyright 1989 by american economic association

gasoline price dispersion and consumer search evidence from a natural experiment the vast majority of empirical studies examining the link between consumer search and price dispersion focus on how changes in consumer search impact price dispersion this article does the reverse it examines how a shock to price dispersion impacts consumer search a direct measure of search is used and an exogenous shock to price dispersion is found in a refinery fire that caused decades old retail gasoline price cycles and the nonlinear high frequency price dispersion pattern generated by them to stop identifying effects from this shock the results show a substantial response of consumer search to changes in price dispersion

prices and heterogeneous search costs we study price formation in a model of consumer search for differentiated products in which consumers have heterogeneous search costs we provide conditions under which a pure strategy symmetric nash equilibrium exists and is unique search costs affect two margins the intensive search margin or search intensity and the extensive search margin or the decision to search rather than to not search at all these two margins affect the elasticity of demand in opposite directions and whether lower search costs result in higher or lower prices depends on the properties of the search cost density

optimal returns policy for supply chain with e marketplace abstract we study in this paper a supply chain which is integrated by a returns policy in the past owing to a lack of sales channels the returned products would worth very little now with the advance of the e commerce the returned products can be sold with a higher price on the e marketplace in light of this we first investigate the optimal returns policy under the existence of the e marketplace through a mean variance analysis we further study the risk issue associated with the optimal policy extensive simulations are then carried out and the managerial insights are discussed

when do consumers search this paper provides empirical evidence relating search to price movements we measure consumer search directly from traffic statistics for web sites that report gasoline prices we show empirically that consumers search more as prices rise than they do when prices fall asymmetric search patterns have consequences for price behavior our findings indicate that retail margins are squeezed by increased search in addition we show that there is more price dispersion when prices are falling than when prices are either stable or rising our results provide a search based explanation for the rockets and feathers phenomenon of asymmetric price adjustment

firm strategies in the mid tail of platform based retailing while millions of products are sold on its retail platform amazon com itself stocks and sells only a very small fraction of them most of these products are sold by third party sellers who pay amazon a fee for each unit sold empirical evidence clearly suggests that amazon tends to sell high demand products and leave long tail products for independent sellers to offer we investigate how a platform owner such as amazon facing ex ante demand uncertainty may strategically learn from these sellers early sales which of the mid tail products are worthwhile for its direct selling and which are best left for others to sell the platform owner s cherry picking of the successful products however gives an independent seller the incentive to mask any high demand by lowering his sales with a reduced service level unobserved by the platform owner we analyze this strategic interaction between a platform owner and an independent seller using a game theoretic model with two types of sellers one with high demand and one with low demand we show that it may not always be optimal for the platform owner to identify the seller s demand interestingly the platform owner may be worse off by retaining its option to sell the independent seller s product whereas both types of sellers may benefit from the platform owner s threat of entry the platform owner s entry option may reduce consumer surplus in the early period although it increases consumer surplus in the later period we also investigate how consumer reviews influence the market outcome

can a decline in search cost increase prices this paper provides a new explanation of why a decline in consumers price search cost may not lead to lower prices in a duopoly with price competition i show that when some consumers are captive to one firm there may be a non monotonic relationship between search cost and market power firms may charge high prices with higher probability and the average price charged may be higher when consumers price search cost falls below a critical level furthermore when firms have asymmetric captive segments expected prices charged by each firm may move in opposite directions as search cost declines resume est ce qu un declin dans le cout de la recherche accroit les prix ce texte propose une nouvelle explication des raisons pour lesquelles un declin dans le cout de la recherche des consommateurs pour le meilleur prix peut ne pas entrainer un declin du niveau des prix dans un duopole avec competition par les prix on montre que quand certains consommateurs sont prisonniers d une firme il peut y avoir une relation non monotone entre cout de la recherche et pouvoir dans ce marche les firmes peuvent imposer des prix plus eleves avec une plus grande probabilite et le prix moyen charge peut etre plus eleve quand le cout de recherche du meilleur prix des consommateurs tombe au dessous d un seuil critique de plus quand les firmes ont des segments captifs asymetriques le prix charge anticipe pour chaque firme peut se deplacer dans des directions opposees a proportion que les couts de recherche declinent

price competition with satisficing consumers abstract the satisficing heuristic by simon 1955 has recently attracted attention both theoretically and experimentally in this paper i study a price competition model in which the consumer is satisficing and firms can influence his aspiration price via marketing unlike existing models whether a price comparison is made depends on both pricing and marketing strategies i fully characterize the unique symmetric equilibrium by investigating the implications of satisficing on various aspects of market competition the proposed model can help explain well documented economic phenomena such as the positive correlation between marketing and prices observed in some markets

consumer search price dispersion and international relative price fluctuations this article develops a model of consumer search consistent with the evidence of substantial price dispersion and time spent shopping within countries to study international deviations from the law of one price lop and relative price fluctuations search frictions lead firms to price discriminate across markets based on the opportunity cost of search which depends on the local wage with productivity and taste shocks estimated from the data deviations from the lop are as volatile and persistent as in the data fluctuations in relative wages real exchange rates and the terms of trade are also consistent with the data

did the euro foster online price competition evidence from an international price comparison site i introduction the euro became a reality for consumers in 12 nations on 1 january 2002 when it was introduced for retail transactions in all the participating countries 1 prior to this retail transactions were conducted in local currencies although there were many macroeconomic and political reasons for the implementation of a single currency one consumer based argument made in favor of the euro s introduction was that a single currency would facilitate the transparency of prices across europe and reduce transaction costs associated with currency exchange pedro solbes the european union eu commissioner for economic and financial affairs suggested that trading in the same currency across borders lowers costs while cross border price transparency encourages competition 2 presumably the mechanism that solbes has in mind by which price transparency encourages competition is through increasing the intensity of consumer search across countries internet price comparison sites offer a natural place to look for such effects given that geographic boundaries are irrelevant online and price transparency in this setting makes it fairly easy for consumers to identify bargains and arbitrage price differences within and among eurozone countries 3 in this article we study the dynamics of online retail pricing in the period immediately before and immediately after the retail introduction of the euro to assess its impact using retail price data that we collected from kelkoo the leading internet price comparison site in the eu our analysis is based on a data set that has several features that distinguish it from the extant literature 4 we collected firm and price information from the kelkoo sites in seven eu countries four in the eurozone and three outside it our study focuses on pricing for 28 products across a variety of product categories and price points we obtained price information during a period that straddled the introduction of the euro thus we are able to look at variation both pre and post euro introduction as well as variation between pricing inside and outside the eurozone to our knowledge this is the first study that offers as many cross country comparisons of online prices and covers as broad a range of products 5 we believe this to be one of the first academic studies regarding the impact of the euro on retail pricing 6 by including four eurozone and three non eurozone countries in the study we examine what some might view as a natural experiment on the impact of this important monetary reform on pricing behavior we recognize that there are differing views of the relevant transaction price to use in comparing prices in online markets some have taken the position that identical products sold by different firms in online markets are homogeneous and therefore that a majority of consumers using a price comparison site will purchase at the minimum listed price see baye and morgan 2001 in this case the relevant price to compare pre and post euro is the minimum price on the other hand one might reasonably argue that price differences for identical products stem from heterogeneities in service or reputations and that firms charging higher prices also enjoy sales note the work of narasimhan 1988 pan et al 2001 and baye et al 2004 in this case the natural comparison is the average price charged by all firms in the market the absence of sales data precludes us from discriminating between these two extreme views therefore we study both average and best quoted minimum prices online figure 1 depicts the trend in the difference in prices over time in this figure we plot the difference in the average price and the difference in the average minimum price between the eurozone and the non eurozone on a weekly basis negative numbers indicate that prices in the eurozone are lower than those in the non eurozone and positive figures indicate the reverse

product diversion to a direct competitor a manufacturer will often limit competition among downstream partners by authorizing only a select group of retailers to carry its product however it is not uncommon for authorized retailers to create an additional competitor by diverting units to an unauthorized seller this paper presents an analytical model that demonstrates how diversion from authorized retailers to an unauthorized direct competitor can occur under circumstances not considered by the prior literature in fact diversion can represent a prisoner s dilemma whereby retailers diminish their own profit by selling to the unauthorized direct seller the authorized retailer s profit loss actually increases as the per unit diversion costs incurred by the authorized retailer decrease the model also shows that the unauthorized direct seller earns greater profit by strategically procuring a unilaterally constraining quantity even though this procurement strategy results in an equivalent increase in the quantity sold by the retailers combined the results identify a new reason for diversion and its consequences for retailers and the unauthorized direct seller

the magnitude of menu costs direct evidence from large u s supermarket chains we use store level data to document the exact process of changing prices and to directly measure menu costs at five multistore supermarket chains we show that changing prices in these establishments is a complex process requiring dozens of steps and a nontrivial amount of resources the menu costs average 105 887 year per store comprising 0 70 percent of revenues 35 2 percent of net margins and 0 52 price change these menu costs may be forming a barrier to price changes specifically 1 a supermarket chain facing higher menu costs due to item pricing laws that require a separate price tag on each item changes prices two and one half times less frequently than the other four chains 2 within this chain the prices of products exempt from the law are changed over three times more frequently than the products subject to the law in principle fixed costs of changing prices can be observed and measured in practice such costs take disparate forms in different firms and we have no data on their magnitude so the theory can be tested at best indirectly at worst not at all alan blinder 1991 p 90

is it enough evidence from a natural experiment in india s agriculture markets access to information and communication technologies icts such as mobile phone networks is widely known to improve market efficiency in this paper we examine whether access to timely and accurate information provided through ict applications has any additional impact using a detailed data set from reuters market light rml a text message service in india that provides daily price information to market participants we find that this information reduces the geographic price dispersion of crops in rural communities by an average of 12 over and above access to mobile phone technology and other means of communication to identify the effect of information on price dispersion we exploit a natural experiment where bulk text messages were banned unexpectedly across india for 12 days in 2010 we find that besides reducing geographic price dispersion rml also increases the rate at which prices converge across india over time we discuss the implications of this for development organizations and informat

the role of information in retail gasoline price dispersion abstract collecting information on prices is a costly endeavor the cost depends on the relative ease with which those prices can be collected and in many retail gasoline markets there is a substantial divide in the ease of collecting information with regular grade gasoline on one side of the divide and midgrade and premium grade gasoline on the other regular grade prices are prominently displayed on large signboards in front of gasoline stations while the prices of higher octane grades except where required by law are rarely displayed in this article the effects of differential by grade price information on search and gasoline price dispersion are examined a rank reversal test is used to test whether the observed grade specific price dispersion is consistent with search or non search related causes and finding the former a series of tests are presented to test for the effect of price information and other leading hypotheses a significantly concave curvature in the price dispersion coefficients across the three grades supports a price information hypothesis detailed socioeconomic data on consumers spatially matched to the stations they are most likely to patronize shows that income is a secondary factor implications for policy are discussed

price discovery in the u s treasury market automation vs intermediation this paper examines the contribution to price discovery by electronic and voice based trading systems in the u s treasury market evidence shows that the electronic trading system has more price discovery and that trading automation increases the speed of incorporating information into prices however human trading generates significant price discovery though its volume is low the relative contribution of a trading system to price discovery depends on liquidity volatility volume trade size and order imbalance the voice based trading system contributes more to price discovery when trade size is large and liquidity is low these findings provide important implications for the design of electronic markets for securities with different characteristics and trading environments this paper was accepted by wei xiong finance

search costs and equilibrium price dispersion in auction markets abstract a leading explanation for price dispersion in posted price markets is search costs we incorporate this insight into a model of competing second price auctions similar to ebay by doing so we extend the narrow literature on competing auctions to capture price dispersion and grow the already large literature on price dispersion to include auctions we provide evidence on search costs and price dispersion using data collected from ebay identifying search costs by exploiting a discontinuity in the visibility of auctions due to ebay s search tool

does price dispersion increase with quality evidence from the online diamond market this article empirically investigates the relationship between price dispersion and price level searches seem more valuable for products of high quality but buyers may have little incentive to search since such products are less frequently purchased the extent of price dispersion is examined using a sample of around 160 000 diamonds offered for sale online estimates from a two stage econometric strategy show that price dispersion increases significantly with quality an explanation is that buyers of high quality gemstones pay little attention to the price of these diamonds and even more so if they perceive high prices as signals of quality and rarity of the diamonds they intend to purchase

price and advertising signals of product quality we present a signaling model based on ideas of phillip nelson in which both the introductory price and the level of directly uninformative advertising or other dissipative marketing expenditures are choice variables and may be used as signals for the initially unobservable quality of a newly introduced experience good repeat purchases play a crucial role in our model a second focus of the paper is on illustrating an approach to refining the set of equilibria in signalling games with multiple potential signals

price setting in online markets basic facts international comparisons and cross border integration we document basic facts about prices in online markets in the united states and canada which is a rapidly growing segment of the retail sector relative to prices in regular stores prices in online markets are more flexible and exhibit stronger pass through 60 75 percent and faster convergence half life less than two months in response to movements of the nominal exchange rate multiple margins of adjustment are active in the process of responding to nominal exchange rate shocks properties of goods sellers and markets are systematically related to pass through and the speed of price adjustment for international price differentials

the intertemporal dynamics of consumer lock in this article examines how dynamic changes in information cost structure and time preferences affect consumers search and switching behavior over time and lead to lock in the information cost structure is conceptualized as a trade off of initial setup costs and ongoing usage costs lock in is defined as consumers decreased propensity to search and switch after an initial investment which is determined both by a preference to minimize immediate costs and by an inability to anticipate the impact of future switching costs the results of three experiments support the proposed mechanism experiment 1 shows that a small initial investment is sufficient to produce lock in experiment 2 shows that the results of a prior investment on lock in are not due to psychological commitment but to a shift in relative costs of incumbent and new options experiment 3 shows that respondents fail to anticipate how their prior investment will lock them in

pricing on the internet it is often claimed that e commerce has created a more competitive environment by encouraging the entry of new online firms and by enabling buyers to search easily for the lowest prices the limited evidence that exists paints a mixed picture many online markets are advertising and technology intensive creating a tendency towards growing concentration price search is imperfect and firms can dampen price competition by increasing product heterogeneity and switching costs in many sectors online firms may come to acquire some market power we look at the forms of pricing that are likely to emerge in such markets including the greater use of price discrimination and auction like trading arrangements copyright 2001 oxford university press

internet job search and unemployment durations after decades of stability the technologies used by workers to locate new jobs began to change rapidly with the diffusion of internet access in the late 1990 s which types of persons incorporated the internet into their job search strategy and did searching for work on line help these workers find new jobs faster we address these questions using measures of internet job search derived from the december 1998 and august 2000 cps computer and internet supplements matched with job search outcomes from subsequent cps files we find that internet searchers are positively selected on observables but negatively selected on unobservables a beneficial unemployment duration reducing causal effect of internet job search is consistent with our estimates only if negative selection on unobservables is especially strong in other words only if the population of on line resumes is strongly adversely selected

strategic aspects of public finance in a world with high capital mobility abstract in a world with high capital mobility an increase in equity taxes is likely to induce a capital out flow it is commonly believed that in consequence there may be an under provision of public goods when governments have only equity taxes at their disposal this paper compares the provision of public goods under cooperative and non cooperative tax policies suprisingly the non cooperative regime may result in either an over or an under provision of public goods it is also shown that the gains from coordination increase as countries become atomistic

umbrella branding as a signal of new product quality an example of signalling by posting a bond i present a signalling model in which a multiproduct firm can use its reputation as a bond for quality by using a brand name for an established product when it introduces a new experience good as out of equilibrium beliefs are specified a false signal may be taken to imply that both the established and the new product are of low quality in contrast the absence of a signal leaves open the possibility that one of the two products is of high quality hence the signal can be credible without excessive sunk costs as long as the bond posted is sufficiently large

consumer inertia choice dependence and learning from experience in a repeated decision problem abstract understanding when and how individuals think about real life problems is a central question in economics this paper studies the role of inertia inattention state dependence and learning the empirical setting is a tariff experiment when optional measured tariffs for local telephone calls were introduced unanticipatedly we find that consumers tend to align their choices of tariff and telephone use levels correctly despite low potential savings mistakes are not permanent as individuals actively engage in tariff switching in order to reduce the monthly cost of telephone service ignoring unobservable heterogeneity and the endogeneity of past choices would have reversed these results

buyer search and price dispersion a laboratory study we study markets with costly buyer search in which sellers simultaneously post prices buyers costlessly observe one or with probability 1 q two of the posted prices and can accept one or pay to search again the experiment varies q the search cost and the number of buyers equilibrium theory predicts a unified very low high price for q 0 q 1 and predicts specific distributions of dispersed prices for q 1 3 and 2 3 actual prices conform closely to the predictions in some treatments buyers reservation prices are biased away from the extremes however and sellers prices have positive autocorrelation and cross sectional correlation

introduction of a second channel implications for pricing and profits in this paper we study the optimal pricing strategies when a product is sold on two channels such as the internet and a traditional channel we assume a stylized deterministic demand model where the demand on a channel depends on prices degree of substitution across channels and the overall market potential we first study four prevalent pricing strategies which differ in the degree of autonomy for the internet channel for a monopoly we provide theoretical bounds for these pricing strategies we also analyze the duopoly case where an incumbent mixed retailer faces competition with a pure retailer and characterize price equilibria finally through a computational study we explore the behavior price and profits under different parameters and consumer preferences for the alternative channels

price dispersion and differentiation in online travel an empirical investigation previous research has examined whether price dispersion exists in theoretically highly efficient internet markets however much of the previous work has been focused on industries with low cost and undifferentiated products in this paper we examine the presence of price dispersion and product differentiation using data on the airline ticket offerings of online travel agents otas we find that different otas offer tickets with substantially different prices and characteristics when given the same customer request some of this variation appears to be due to product differentiation different otas specialize by systematically offering different trade offs between ticket price and ticket quality minimizing the number of connections matching requested departure and return time however even after accounting for differences in ticket quality ticket prices vary by as much as 18 across otas in addition otas return tickets that are strictly inferior to the ticket offered by another ota for the same request between 2 2 and 28 of the time overall this suggests the presence of both price dispersion and product differentiation in the online travel market

e commerce transactions the installed base of credit cards and the potential mobile e commerce adoption abstractmobile e commerce m commerce relaxes consumers temporal and geographic purchasing constraints and encourage the establishment of omnichannel markets it is often argued that rapid increase in smartphone penetration is the primary driver of m commerce adoption whereas others contend that early adoption of m commerce applications are mostly by relatively heavy internet commerce users brynjolfsson et al 2013 argue that rapid increase in smartphone penetration is the primary driver of m commerce adoption whereas einav et al 2014 contend that early adoption of m commerce applications are mostly by relatively heavy internet commerce users this article explores strength of the influences within a nested multiple service framework where the reduced form econometric analysis allows for interdependency between m commerce and e commerce services and the installed base of credit cards the results reveal a complex situation in which credit cards facilitate e commerce services whereas m com

hiring preferences in online labor markets evidence of a female hiring bias online labor marketplaces facilitate the efficient matching of employers and workers across geographical boundaries the exponential growth of this nascent online phenomenon holds important social and economic implications as the hiring decisions made on these online platforms implicate the incomes of millions of workers worldwide despite this importance limited effort has been devoted to understanding whether potential hiring biases exist in online labor platforms and how they may affect hiring outcomes using a novel proprietary data set from a leading online labor platform we investigate the impact of gender based stereotypes on hiring outcomes after accounting for endogeneity via a holistic set of job and worker controls a matched sample approach and a quasi experimental technique we find evidence of a positive hiring bias in favor of female workers an experiment was used to uncover the underlying gender specific traits that could influence hiring outcomes we find that the observed hiring bi

revolutionary effects of new information technologies in markets with imperfect information and heterogeneity the information technology affects the rate at which agents meet which affects the distribution of production technologies across firms multiple equilibria may arise because the reservation utility and the lowest production technology in use affect each other the adoption of novel information technologies may then entail a revolution in the sense of a move from an inefficient to equilibrium inefficient production technologies are swiftly moved even in sectors where the new information technology has only recently been introduced the results apply to consumer products labour intermediates and institutions royal economic society 2006

market structure and market performance in e commerce we investigate the effect of market structure on market performance in the market for consumer electronics we exploit product life cycle information to build an instrumental variable for the number of firms in a market a variable which hitherto had to be treated as exogenous in comparable studies on seller behavior in e commerce we combine data from austria s largest online site for price comparisons with retail data on wholesale prices provided by a major hardware producer for consumer electronics we observe input prices of firms and all their moves in the entry and the pricing game using this information for 70 digital cameras we generate instrumenting is particularly important for estimating the effect of competition on the markup of the price leader

note on self restraint as an online entry deterrence strategy we develop a game theoretical model to show that in the markets where price consistency across channels is critical an incumbent brick and mortar retailer can deter the online entry of a pure play e tailer by strategically refraining from entering online in the markets where price consistency is not a constraint we find that the incumbent can deter the e tailer s entry only if it enters online and credibly operates the online channel as an independent profit center in other words the incumbent must be willing to cannibalize its own brick and mortar business by charging a low online price we also discuss some social welfare implications of retail online entry and the managerial insights of our analysis

price distributions and competition considerable evidence demonstrates that significant dispersion exists in the prices charged for seemingly homogeneous goods this paper adopts a simple flexible equilibrium model of search to investigate the way the market structure influences price dispersion using the noisy search approach the paper demonstrates the effects of having a single large price leading firm with multiple outlets and a competitive fringe of small firms with one retail outlet each

the beginning of online retail competition and its origins an application to personal computers abstract this paper measures cross price elasticity for online and retail personal computers pcs across several years the results indicate that cross price elasticity for 1996 and 1997 was a statistical 0 while in 1998 it was large and statistically significant approximately 3 0 i consider both demand side and supply side explanations for this change my demand side explanations argue that a change in the composition of households shopping in online and retail markets is responsible for the switch the empirical results suggest that these explanations are not correct my supply side explanations argue that changes in business models late in 1997 were responsible instead the first supply side explanation says that expansion by firms from single to multiple distribution channels e g expansion from online only to online and retail drove the new competition both apple and gateway made such expansions late in 1997 and the data provide some evidence that this contributed to online retail competition the second explanation says that the increase in the number of brands offering both physical inspection through a physical location and customizability drove the new competition these changes marked directed efforts to target high end buyers by both types of suppliers the data also support this explanation while i am unable to quantify which has the greater impact it is clear that online retail competition began largely because of these two supply side changes

free riding and sales strategies for the internet for many products internet sales can free ride oi of the promotional eiort exerted by brick and mortar retailers leading manufacturers to attempt to control the availability and pricing of their products over the internet we examine three categories of products fragrances dvd players and side by side refrigerators our evidence suggests that manufacturers that limit distribution in the physical world use various mechanisms to limit distribution online in particular these manufacturers generally prevent the sale of their products by internet retailers that oier deep discounts furthermore manufacturer websites tend to charge high prices suggesting that manufacturers may internalize free rider issues i introduction while internet sales total only about 1 0 of all retail sales in the united states 1 the rapid growth of internet commerce suggests that this sales channel will become a signi cant factor for many goods managing channel con ict between brick and mortar retailers and internet retailers is an important and growing problem faced by many manufacturers of branded goods manufacturers of branded goods have placed a variety of restrictions on their brick and mortar retailers in an eiort to control freeriding on the sales and promotional eiorts of retailers the emergence of the internet as a new distribution channel requires manufacturers to develop restrictions on internet retailers to control free riding in this paper we investigate empirically the extent to which manufacturers of three types of branded goods appear to control the pricing and

pricing with customer recognition abstract this article studies the dynamic effects of behaviour based price discrimination and customer recognition in a duopolistic market where the distribution of consumers preferences is discrete consumers are myopic and firms are forward looking in the static and first period equilibrium firms choose prices with mixed strategies when price discrimination is allowed forward looking firms have an incentive to avoid customer recognition thus the probability that both will have positive first period sales decreases as they become more patient furthermore an asymmetric equilibrium sometimes exists yielding a 100 0 division of the first period sales as a whole price discrimination is bad for profits but good for consumer surplus and welfare

on the effects of consumer search and firm entry in a multiproduct competitive market this paper studies a model in which consumers search among multiple competing firms for products that match their preferences at a reasonable price we focus on how easier search possibly due to the adoption of search facilitating technologies such as the internet influences equilibrium prices assortments firm profits and consumer welfare conventional wisdom suggests that easier search creates a competition intensifying effect that puts pressure on firms to lower their prices and reduce assortments however in our model we demonstrate that search also exhibits a market expansion effect that encourages firms to expand their assortment easier search means that each firm is searched by more consumers because of broader assortments consumers are more likely to find products that better match their ideal preferences improving the efficiency of the market in fact we demonstrate that the market expansion effect can even dominate the competition intensifying effect potentially leading to higher prices broader assortments more profits and expanded welfare

reducing protest responses by deliberative monetary valuation improving the validity of biodiversity valuation this paper focuses on examining the validity of biodiversity valuation methodologies the results of a group deliberation technique deliberative monetary valuation are compared to those derived from a contingent valuation cv survey using the same environmental topic evidence is here presented that dmv can address some of the limitations of cv namely a prevalence for lexicographic preference ordering due to psychological reasons and the lack of a priori or well formed preferences both of these methodological shortcomings can result in protest responses which decrease the external validity of results it is common environmental valuation methodology practice to exclude protest responses from the analysis on the grounds that they are illegitimate choices thus the sample and consequently the environmental valuation analysis may become less representative of the population an advantage of the dmv methodology is that it was found to significantly reduce the rate of protest responses to less than half from 29 to 13 furthermore dmv significantly increased the proportion of positive bids but not the amounts contributed in relation to preference formation issues we suggest rethinking the current practice of the dmv method and propose dedicating the entire initial discussion session to introducing the good outside of a valuation context