Price Dispersion in the Lab and on the Internet: Theory and Evidence
Price dispersion is ubiquitous in settings that closely approximate textbook Bertrand competition. We show that only a little bounded rationality among sellers is needed to rationalize such dispersion. A variety of statistical tests, based on datasets from two independent laboratory experiments and structural estimates of the parameters of our models, suggest that bounded-rationality-based theories of price dispersion organize the data remarkably well. Evidence is also presented to suggest that the models are consistent with data from a leading Internet price comparison site.
To our knowledge, this item is not available for
download. To find whether it is available, there are three
1. Check below under "Related research" whether another version of this item is available online.
2. Check on the provider's web page whether it is in fact available.
3. Perform a search for a similarly titled item that would be available.
Volume (Year): 35 (2004)
Issue (Month): 3 (Autumn)
|Contact details of provider:|| Web page: http://www.rje.org|
|Order Information:||Web: https://editorialexpress.com/cgi-bin/rje_online.cgi|
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August.
- repec:dgr:uvatin:20000042 is not listed on IDEAS
- Reinganum, Jennifer F, 1979.
"A Simple Model of Equilibrium Price Dispersion,"
Journal of Political Economy,
University of Chicago Press, vol. 87(4), pages 851-58, August.
- Gladys López-Acevedo, 1997. "Quantal response equilibria for posted offer-markets," Estudios Económicos, El Colegio de México, Centro de Estudios Económicos, vol. 12(2), pages 95-131.
- Martin Sefton & Abdullah Yavas & Eric Abrams, 2000. "An experimental comparison of two search models," Economic Theory, Springer, vol. 16(3), pages 735-749.
- McKelvey Richard D. & Palfrey Thomas R., 1995. "Quantal Response Equilibria for Normal Form Games," Games and Economic Behavior, Elsevier, vol. 10(1), pages 6-38, July.
- McFadden, Daniel L., 1984. "Econometric analysis of qualitative response models," Handbook of Econometrics, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 2, chapter 24, pages 1395-1457 Elsevier.
- Dufwenberg, Martin & Gneezy, Uri, 2000.
"Price competition and market concentration: an experimental study,"
International Journal of Industrial Organization,
Elsevier, vol. 18(1), pages 7-22, January.
- Dufwenberg, M. & Gneezy, U., 1998. "Price Competition and Market COncentration: An Experimental Study," Papers 1998-08, Uppsala - Working Paper Series.
- Dufwenberg, Martin & Gneezy, Uri, 1998. "Price Competition and Market Concentration: An Experimental Study," Working Paper Series 1998:8, Uppsala University, Department of Economics.
- Dufwenberg, Martin & Gneezy, Uri, 1999. "Price Competition and Market Concentration: An experimental Study," Research Papers in Economics 1999:4, Stockholm University, Department of Economics.
- Michael R. Baye & John Morgan & Patrick Scholten, 2004.
"Price Dispersion in the Small and in the Large: Evidence from an Internet Price Comparison Site,"
2004-03, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 463-496, December.
- Warner, Elizabeth J & Barsky, Robert B, 1995. "The Timing and Magnitude of Retail Store Markdowns: Evidence from Weekends and Holidays," The Quarterly Journal of Economics, MIT Press, vol. 110(2), pages 321-52, May.
- Radner, Roy, 1980. "Collusive behavior in noncooperative epsilon-equilibria of oligopolies with long but finite lives," Journal of Economic Theory, Elsevier, vol. 22(2), pages 136-154, April.
- Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
- Plott, Charles R, 1982.
"Industrial Organization Theory and Experimental Economics,"
Journal of Economic Literature,
American Economic Association, vol. 20(4), pages 1485-1527, December.
- Plott, Charles R., . "Industrial Organization Theory and Experimental Economics," Working Papers 405, California Institute of Technology, Division of the Humanities and Social Sciences.
- Villas-Boas, J Miguel, 1995. "Models of Competitive Price Promotions: Some Empirical Evidence from the Coffee and Saltine Crackers Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 4(1), pages 85-107, Spring.
- Pratt, John W & Wise, David A & Zeckhauser, Richard, 1979. "Price Differences in Almost Competitive Markets," The Quarterly Journal of Economics, MIT Press, vol. 93(2), pages 189-211, May.
- Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
- Cason, Timothy N. & Friedman, Daniel, 2003.
"Buyer search and price dispersion: a laboratory study,"
Journal of Economic Theory,
Elsevier, vol. 112(2), pages 232-260, October.
- Timothy N. Cason & Daniel Friedman, 2000. "Buyer Search and Price Dispersion: A Laboratory Study," Econometric Society World Congress 2000 Contributed Papers 1549, Econometric Society.
- Simon P. Anderson & Jacob K. Goeree & Charles A. Holt, 1998. "Rent Seeking with Bounded Rationality: An Analysis of the All-Pay Auction," Journal of Political Economy, University of Chicago Press, vol. 106(4), pages 828-853, August.
- Spulber, Daniel F, 1995. "Bertrand Competition When Rivals' Costs Are Unknown," Journal of Industrial Economics, Wiley Blackwell, vol. 43(1), pages 1-11, March.
- David, Douglas D & Holt, Charles A, 1996. "Consumer Search Costs and Market Performance," Economic Inquiry, Western Economic Association International, vol. 34(1), pages 133-51, January.
- J. Rupert Gatti, 2000. "Equilibrium Price Dispersion with Sequential Search," Econometric Society World Congress 2000 Contributed Papers 1368, Econometric Society.
- Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, vol. 91(3), pages 454-474, June.
- Rosenthal, Robert W, 1980. "A Model in Which an Increase in the Number of Sellers Leads to a Higher Price," Econometrica, Econometric Society, vol. 48(6), pages 1575-79, September.
When requesting a correction, please mention this item's handle: RePEc:rje:randje:v:35:y:2004:3:p:448-466. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: ()
If references are entirely missing, you can add them using this form.