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Consumer Search and Oligopolistic Pricing: An Empirical Investigation

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Author Info
Maarten C.W. Janssen () (Faculty of Economics, Erasmus Universiteit Rotterdam)
José Luis Moraga-González () (Groningen University)
Matthijs R. Wildenbeest () (Faculty of Economics, Erasmus Universiteit Rotterdam)

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Abstract

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!).

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Publisher Info
Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-071/1.

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Date of creation: 29 Jun 2004
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Handle: RePEc:dgr:uvatin:20040071

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Related research
Keywords: consumer search oligopoly price dispersion maximum likelihood estimation

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Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
D40 - Microeconomics - - Market Structure and Pricing - - - General
L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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    Other versions:
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