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Posting Multiple Prices To Reduce The Effectiveness Of Consumer Price Search

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  • NORMAN J. IRELAND

Abstract

In a model of competition with imperfect consumer price information and incomplete price search, some consumers may end up comparing prices originating from the same supplier: either because one firm sets multiple prices or because a group of firms colludes. This leads to added monopoly power for these firms, and average prices in the mixed strategy equilibrium become higher. There is a shift in welfare from consumers to producers, both with exogenous and endogenous consumer search behaviour. However consumers might search more or less with multiple prices. The implications for the price‐setting equilibrium, competition policy and recent judgements are considered.

Suggested Citation

  • Norman J. Ireland, 2007. "Posting Multiple Prices To Reduce The Effectiveness Of Consumer Price Search," Journal of Industrial Economics, Wiley Blackwell, vol. 55(2), pages 235-263, June.
    • Handle: RePEc:bla:jindec:v:55:y:2007:i:2:p:235-263
    DOI: 10.1111/j.1467-6451.2007.00310.x
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    Cited by:

    1. Alderighi, Marco & Nicolini, Marcella, 2022. "Strategic information disclosure in vertical markets," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    2. Konrad, Kai A., 2011. "Search costs and corporate income tax competition," Economics Letters, Elsevier, vol. 112(2), pages 213-215, August.
    3. Shelegia, Sandro, 2012. "Multiproduct pricing in oligopoly," International Journal of Industrial Organization, Elsevier, vol. 30(2), pages 231-242.
    4. Hämäläinen, Saara, 2022. "Multiproduct search obfuscation," International Journal of Industrial Organization, Elsevier, vol. 85(C).
    5. Steve Thompson, 2009. "Grey Power: An Empirical Investigation of the Impact of Parallel Imports on Market Prices," Journal of Industry, Competition and Trade, Springer, vol. 9(3), pages 219-232, September.
    6. Stephen McDonald & Colin Wren, 2018. "Multibrand pricing as a strategy for consumer search obfuscation in online markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 27(2), pages 171-187, June.
    7. Glenn Ellison & Sara Fisher Ellison, 2017. "Search and Obfuscation in a Technologically Changing Retail Environment: Some Thoughts on Implications and Policy," NBER Chapters, in: Innovation Policy and the Economy, Volume 18, pages 1-25, National Bureau of Economic Research, Inc.

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