This file is part of IDEAS, which uses RePEc data


[ Papers | Articles | Software | Books | Chapters | Authors | Institutions | JEL Classification | NEP reports | Search | New papers by email | Author registration | Rankings | Volunteers | FAQ | Blog | Help! ]

Clicks, Discontinuities, and Firm Demand Online

Author info | Abstract | Publisher info | Download info | Related research | Statistics
Author Info
Michael R. Baye (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)
J. Rupert J. Gatti (University of Cambridge)
Paul Kattuman (University of Cambridge)
John Morgan (University of California at Berkeley)

Additional information is available for the following registered author(s):

Abstract

The market values of online platforms, such as Yahoo, stem from their ability to monetize the clicks they generate for firms advertising on their sites. We exploit a unique dataset on clicks from one of Yahoo's price comparison sites to estimate the determinants of clicks received by online retailers. We find that a firm enjoys a 60% jump in its clicks when it offers the lowest price at the site. This discontinuity is consistent with a variety of models that have been used to rationalize the price dispersion observed in online markets. We also show that one may use estimates of the determinants of a firm's clicks to obtain bounds on its underlying demand parameters, including own- and cross-price elasticities. Our results have potentially significant ramifications for online retailers, platforms, and policymakers: Failure to account for discontinuities distorts parameter estimates by 50 to 100 percent.

Download Info
To download:

If you experience problems downloading a file, check if you have the proper application to view it first. Information about this may be contained in the File-Format links below. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2006-21-baye-gatti-kattuman-morgan.pdf
File Format: application/pdf
File Function:
Download Restriction: no

Publisher Info
Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2006-21.

Download reference. The following formats are available: HTML (with abstract), plain text (with abstract), BibTeX, RIS (EndNote, RefMan, ProCite), ReDIF
Length:
Date of creation: 2006
Date of revision:
Handle: RePEc:iuk:wpaper:2005-21

Contact details of provider:
Postal: 1309 East Tenth Street, Room 451, Bloomington, IN 47405-1701
Phone: 812-855-9219
Fax: 812-855-3354
Email:
Web page: http://www.bus.indiana.edu/bepp/
More information through EDIRC

For technical questions regarding this item, or to correct its listing, contact: (Rick Harbaugh).

Related research
Keywords:

Other versions of this item:

Find related papers by JEL classification:
D4 - Microeconomics - - Market Structure and Pricing
D8 - Microeconomics - - Information, Knowledge, and Uncertainty
L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
M3 - Business Administration and Business Economics; Marketing; Accounting - - Marketing and Advertising

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site," Journal of Industrial Economics, Blackwell Publishing, vol. 52(4), pages 463-496, December. [Downloadable!] (restricted)
    Other versions:
  2. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Temporal Price Dispersion: Evidence from an Online Consumer Electronics Market," Working Papers 2004-04, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  3. Jerry A. Hausman & Bronwyn H. Hall & Zvi Griliches, 1984. "Econometric Models for Count Data with an Application to the Patents-R&D Relationship," NBER Technical Working Papers 0017, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Shilony, Yuval, 1977. "Mixed pricing in oligopoly," Journal of Economic Theory, Elsevier, vol. 14(2), pages 373-388, April. [Downloadable!] (restricted)
  5. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Applications to Poisson Models," Econometrica, Econometric Society, vol. 52(3), pages 701-20, May. [Downloadable!] (restricted)
    Other versions:
  6. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June. [Downloadable!] (restricted)
  7. Gourieroux, Christian & Monfort, Alain & Trognon, Alain, 1984. "Pseudo Maximum Likelihood Methods: Theory," Econometrica, Econometric Society, vol. 52(3), pages 681-700, May. [Downloadable!] (restricted)
    Other versions:
  8. Glenn Ellison & Sara Fisher Ellison, 2004. "Search, Obfuscation, and Price Elasticities on the Internet," NBER Working Papers 10570, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  9. Austan Goolsbee & Judith Chevalier, 2002. "Measuring Prices and Price Competition Online: Amazon and Barnes and Noble," NBER Working Papers 9085, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  10. Cameron, A Colin & Trivedi, Pravin K, 1986. "Econometric Models Based on Count Data: Comparisons and Applications of Some Estimators and Tests," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 1(1), pages 29-53, January. [Downloadable!] (restricted)
  11. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September. [Downloadable!] (restricted)
  12. Cameron, A. Colin & Trivedi, Pravin K., 1990. "Regression-based tests for overdispersion in the Poisson model," Journal of Econometrics, Elsevier, vol. 46(3), pages 347-364, December. [Downloadable!] (restricted)
  13. Michael R. Baye & John Morgan & Patrick Scholten, 2006. "Information, Search, and Price Dispersion," Working Papers 2006-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy. [Downloadable!]
  14. Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-79, September. [Downloadable!] (restricted)
  15. Spulber, Daniel F, 1995. "Bertrand Competition When Rivals' Costs Are Unknown," Journal of Industrial Economics, Blackwell Publishing, vol. 43(1), pages 1-11, March. [Downloadable!] (restricted)
  16. Michael Smith & Erik Brynjolfsson, 1999. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Computing in Economics and Finance 1999 1022, Society for Computational Economics.
  17. Jeffrey R. Brown & Austan Goolsbee, 2002. "Does the Internet Make Markets More Competitive? Evidence from the Life Insurance Industry," Journal of Political Economy, University of Chicago Press, vol. 110(3), pages 481-507, June. [Downloadable!] (restricted)
    Other versions:
  18. Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," Journal of Business, University of Chicago Press, vol. 61(4), pages 427-49, October. [Downloadable!] (restricted)
  19. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May. [Downloadable!] (restricted)
  20. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September. [Downloadable!] (restricted)
  21. Dana, James D, Jr, 1994. "Learning in an Equilibrium Search Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(3), pages 745-71, August. [Downloadable!] (restricted)
    Other versions:
  22. Maarten C. W. Janssen & José Luis Moraga-González, 2004. "Strategic Pricing, Consumer Search and the Number of Firms," Review of Economic Studies, Blackwell Publishing, vol. 71(4), pages 1089-1118, October. [Downloadable!] (restricted)
Full references

Statistics
Access and download statistics

Did you know? LogEc provides statistical analysis about downloads from this service (and others).

This page was last updated on 2010-3-8.

This information is provided to you by IDEAS at the Department of Economics, College of Liberal Arts and Sciences, University of Connecticut using RePEc data on a server sponsored by the Society for Economic Dynamics.