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Search, Obfuscation, and Price Elasticities on the Internet

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  • Glenn Ellison
  • Sara Fisher Ellison

Abstract

We examine the competition between a group of Internet retailers that operate in an environment where a price search engine plays a dominant role. We show that for some products in this environment, the easy price search makes demand tremendously price-sensitive. Retailers, though, engage in obfuscation---practices that frustrate consumer search or make it less damaging to firms---resulting in much less price sensitivity on other products. We discuss several models of obfuscation and examine its effects on demand and markups empirically. Observed markups are adequate to allow efficient online retailers to survive.

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Bibliographic Info

Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 10570.

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Date of creation: Jun 2004
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Publication status: published as Glenn Ellison & Sara Fisher Ellison, 2009. "Search, Obfuscation, and Price Elasticities on the Internet," Econometrica, Econometric Society, vol. 77(2), pages 427-452, 03.
Handle: RePEc:nbr:nberwo:10570

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