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Consumer Search and Oligopolistic Pricing: An Empirical Investigation

Author

Listed:
  • Maarten C. W. Janssen
  • José Luis Moraga-González
  • Matthijs R. Wildenbeest

Abstract

This paper presents an empirical examination of oligopoly pricing and consumer search. The theoretical model allows for sequential and non-sequential search and, using the theoretical restrictions firm and consumer behavior impose on the data, we study the empirical validity of the models. Two equilibria arise: one with costless search and the other with costly search. We find that the costless search equilibrium works well for products with a relatively low value, and, by implication, a small number of sellers. By contrast, the costly search equilibrium explains the observed data in a manner that is consistent with the underlying theoretical model for almost all products (for 86 out of 87!).

Suggested Citation

  • Maarten C. W. Janssen & José Luis Moraga-González & Matthijs R. Wildenbeest, 2004. "Consumer Search and Oligopolistic Pricing: An Empirical Investigation," CESifo Working Paper Series 1292, CESifo Group Munich.
  • Handle: RePEc:ces:ceswps:_1292
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    References listed on IDEAS

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    Cited by:

    1. Franco Mariuzzo & Patrick Paul Walsh & Ciara Whelan, 2004. "EU Merger Control in Differentiated Product Industries," CESifo Working Paper Series 1312, CESifo Group Munich.

    More about this item

    Keywords

    consumer search; oligopoly; price dispersion; maximum likelihood estimation;

    JEL classification:

    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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