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On the evolution of monopoly pricing in Internet-assisted search markets

Author

Listed:
  • García-Gallego, Aurora
  • Georgantzís, Nikolaos
  • Jaramillo-Gutiérrez, Ainhoa
  • Pereira, Pedro
  • Pernías-Cerrillo, J. Carlos

Abstract

This study examines the evolution of prices in markets with Internet price-comparison search engines. The empirical study analyzes laboratory data of prices available to informed consumers, for two industry sizes and two conditions on the sample (complete and incomplete). Distributions are typically bimodal. One of the two modes of distribution, corresponding to monopoly pricing, tends to attract such pricing strategies increasingly over time. The second one, corresponding to interior pricing, follows a decreasing trend. Monopoly pricing can serve as a means of insurance against more competitive (but riskier) behavior. In fact, experimental subjects who initially earn low profits due to interior pricing are more likely to switch to monopoly pricing than subjects who experience good returns from the start.

Suggested Citation

  • García-Gallego, Aurora & Georgantzís, Nikolaos & Jaramillo-Gutiérrez, Ainhoa & Pereira, Pedro & Pernías-Cerrillo, J. Carlos, 2014. "On the evolution of monopoly pricing in Internet-assisted search markets," Journal of Business Research, Elsevier, vol. 67(5), pages 795-801.
  • Handle: RePEc:eee:jbrese:v:67:y:2014:i:5:p:795-801
    DOI: 10.1016/j.jbusres.2013.11.047
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    References listed on IDEAS

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    More about this item

    Keywords

    Internet economics; Price-comparison search engines; Mixed strategy equilibria; Experimental economics;

    JEL classification:

    • D0 - Microeconomics - - General
    • D2 - Microeconomics - - Production and Organizations
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • L4 - Industrial Organization - - Antitrust Issues and Policies

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