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Clicks, Discontinuities, and Firm Demand Online

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  • Michael R. Baye
  • J. Rupert J. Gatti
  • Paul Kattuman
  • John Morgan

Abstract

We exploit a unique dataset from a price comparison site 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, and failure to account for discontinuities distorts parameter estimates by nearly 100%. This discontinuity is consistent with a variety of models that have been used to rationalize online price dispersion. Finally, we show that one may use estimates of the determinants of a firm's clicks to obtain bounds on its underlying demand parameters, including standard elasticities of demand.

Suggested Citation

  • Michael R. Baye & J. Rupert J. Gatti & Paul Kattuman & John Morgan, 2009. "Clicks, Discontinuities, and Firm Demand Online," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 18(4), pages 935-975, December.
    • Handle: RePEc:bla:jemstr:v:18:y:2009:i:4:p:935-975
    DOI: 10.1111/j.1530-9134.2009.00234.x
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    More about this item

    JEL classification:

    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • 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; Personnel Economics - - Marketing and Advertising

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