An experimental study of price dispersion
نویسندگان
چکیده
Price comparison sites have become an increasingly popular way to shop online. Yet, even though consumers have complete access to the list of prices for apparently identical products offered on these sites, persistent price dispersion has been widely observed. One important theoretical explanation for this phenomenon comes from clearinghouse models of price dispersion. These models predict that price dispersion arises because of consumer heterogeneities – some consumers are “informed” and simply buy from the firm offering the lowest price while the remaining consumers are “captive” and shop based on considerations other than price. Using a simple clearinghouse model, we derive testable comparative static implications of changes in market structure on equilibrium pricing. We show that an increase in the fraction of informed consumers leads to more competitive pricing for all consumers. Further, we show that when more firms enter the market, prices to informed consumers become more competitive, but prices to captive customers become less competitive. We then assess these implications in a laboratory experiment. Despite some discrepancies between predicted and pricing behavior, we find strong support for the comparative static predictions derived above.
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ورودعنوان ژورنال:
- Games and Economic Behavior
دوره 54 شماره
صفحات -
تاریخ انتشار 2006