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Market transparency and consumer search - Evidence from the German retail gasoline market

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  • Martin, Simon

Abstract

We study a novel trade-off in market transparency regulation by estimating a structural model of the German retail gasoline market. Transparent environments enable easy price comparisons and match findings. Restricting transparency such that only the cheapest offers are shown induces firms to compete for attention, but matching is inefficient. We find that there is an inverse u-shaped relationship between consumer welfare and market transparency. Consumer welfare is maximal when only the first 20% of prices are shown, which decreases consumer expenditures by 1.2%. Our framework allows estimating games of incomplete information with very lax data requirement.

Suggested Citation

  • Martin, Simon, 2020. "Market transparency and consumer search - Evidence from the German retail gasoline market," DICE Discussion Papers 350, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).
    • Handle: RePEc:zbw:dicedp:350
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    2. Felix Montag & Alina Sagimuldina & Christoph Winter, 2023. "Whom to Inform about Prices? Evidence from the German Fuel Market," Rationality and Competition Discussion Paper Series 415, CRC TRR 190 Rationality and Competition.
    3. Fan, Ying & Fu, Yuqi & Yang, Zan, 2024. "Door-in-the-face heuristics: Intermediaries’ diversion in rental markets," Working Paper Series 24/2, Royal Institute of Technology, Department of Real Estate and Construction Management & Banking and Finance.
    4. Timothy Holt & Mitsuru Igami & Simon Scheidegger, 2021. "Detecting Edgeworth Cycles," Cahiers de Recherches Economiques du Département d'économie 21.16, Université de Lausanne, Faculté des HEC, Département d’économie.
    5. W. Benedikt Schmal, 2022. "From Rules to Regs: A Structural Topic Model of Collusion Research," Papers 2210.02957, arXiv.org.

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    More about this item

    Keywords

    market transparency; consumer search; awareness; consideration sets; retail gasoline prices;
    All these keywords.

    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L50 - Industrial Organization - - Regulation and Industrial Policy - - - General

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