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Mixed pricing in online marketplaces

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  • Katja Seim

    (University of Pennsylvania)

  • Michael Sinkinson

    (University of Pennsylvania)

Abstract

A rich theory literature predicts mixed strategies in posted prices due to standard price discrimination, search frictions, and various other rationales. While typically interpreted as implying occasional sales or price dispersion, online marketplaces enable a firm to truly use randomization as a tool in pricing, and so such behavior should be expected to arise in online settings. We investigate a case of mixed pricing across a large subset of products on a major e-commerce website. We first test for randomizing behavior, and then construct a model of price discrimination that would generate randomization as optimal behavior. We estimate the model and use it to assess pricing effects of a proposed merger in the industry.

Suggested Citation

  • Katja Seim & Michael Sinkinson, 2016. "Mixed pricing in online marketplaces," Quantitative Marketing and Economics (QME), Springer, vol. 14(2), pages 129-155, June.
    • Handle: RePEc:kap:qmktec:v:14:y:2016:i:2:d:10.1007_s11129-016-9168-3
    DOI: 10.1007/s11129-016-9168-3
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    Cited by:

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    3. Gentry, Matthew & Pesendorfer, Martin, 2021. "Pricing with bargain hunting consumers," Games and Economic Behavior, Elsevier, vol. 129(C), pages 549-569.
    4. Brian Adams & Kevin R. Williams, 2019. "Zone Pricing in Retail Oligopoly," American Economic Journal: Microeconomics, American Economic Association, vol. 11(1), pages 124-156, February.
    5. Meens-Eriksson, Sef, 2024. "The Economics of Residual Waste: Policies, Price discrimination, and Welfare," Umeå Economic Studies 1022, Umeå University, Department of Economics.
    6. Mucunska Palevska, Valentina & Novkovska, Blagica, 2018. "The Participation Of Ict In Activities Of Economic Subjects In Small Economy," UTMS Journal of Economics, University of Tourism and Management, Skopje, Macedonia, vol. 9(2), pages 157-168.
    7. Cong Peng, 2019. "Does e-commerce reduce traffic congestion? Evidence from Alibaba Single Day shopping event," CEP Discussion Papers dp1646, Centre for Economic Performance, LSE.
    8. Meens-Eriksson, Sef, 2024. "Welfare effects of companies’ use of market power through spatial price discrimination: The case of the Swedish waste incineration market," Umeå Economic Studies 1021, Umeå University, Department of Economics.
    9. Peng, Cong, 2019. "Does e-commerce reduce traffic congestion? Evidence from Alibaba Single Day shopping event," LSE Research Online Documents on Economics 103411, London School of Economics and Political Science, LSE Library.
    10. Gentry, Matthew & Pesendorfer, Martin, 2021. "Pricing with bargain hunting consumers," LSE Research Online Documents on Economics 111591, London School of Economics and Political Science, LSE Library.

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    More about this item

    Keywords

    Price discrimination; Online markets; Merger analysis;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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