Search, obfuscation, and price elasticities on the Internet
By: Glenn Ellison [and] Sara Ellison
Contributors: Ellison, Sara Fisher; Massachusetts Institute of Technology. Dept. of Economics
Series: Working paper series / Massachusetts Institute of Technology, Dept. of Economics -- working paper 04-27; Working paper (Massachusetts Institute of Technology. Dept. of Economics) -- no. 04-27.
Publisher: Massachusetts Institute of Technology, Dept. of Economics
Published: 2004
Place of publication: Cambridge, MA
Language: eng
Number of pages: 52
Description: We examine the competition between a group of Internet retailers that operate in an environment where a price search engine plays a dominant role. We show that for some products in this environment, the easy price search makes demand tremendously price-sensitive. Retailers, though, engage in obfuscation - practices that frustrate consumer search or make it less damaging to firms - resulting in much less price sensitivity on some other products. We discuss several models of obfuscation and examine its effects on demand and markups empirically. Observed markups are adequate to allow efficient online retailers to survive. Keywords: search, obfuscation, Internet, retail, search engines, loss leaders, add-on pricing, website design, demand elasticities, frictionless commerce. JEL Classifications: L8, D4, M3.
Notes: "June 2004."

Includes bibliographical references (p. 41-42).

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