Consumer Search and Oligopolistic Pricing: An Empirical Investigation
This paper presents an empirical examination of oligopoly pricing and consumer search. The theoretical model allows for sequential and non-sequential search and using the theoretical restrictions firm and consumer behavior impose on the data we study the empirical validity of the models. Two equilibria arise: one with costless search and the other with costly search. We find that the costless search equilibrium works well for products with a relatively low value, and, by implication, a small number of sellers. By contrast, the costly search equilibrium explains the observed data in a manner that is consistent with the underlying theoretical model for almost all products (for 86 out of 87!).
|consumer search, maximum likelihood estimation, oligopoly, price dispersion|
|Estimation (jel C13), Market Structure and Pricing: General (jel D40), Oligopoly and Other Imperfect Markets (jel L13)|
|Tinbergen Institute Discussion Paper Series|
Janssen, M.C.W, Moraga-Gonzalez, J.L, & Wildenbeest, M.R. (2004). Consumer Search and Oligopolistic Pricing: An Empirical Investigation (No. TI 04-071/1). Tinbergen Institute Discussion Paper Series. Retrieved from http://hdl.handle.net/1765/6628