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

  • Aurora García-Gallego


    (LEE & Department of Economics, Universitat Jaume I, Castellón, Spain)

  • Nikolaos Georgantzis


    (GLOBE & Economics Department, University of Granada, Spain
    LEE & Economics Department, Universitat Jaume I, Castellón-Spain)

  • Ainhoa Jaramillo-Gutiérrez


    (EriCes & Dpt. of Applied Economics, University of Valencia, Spain)

  • Pedro Pereira


    (Autoridade da Concorrência and CEFAGE-UE, U. of Evora, Portugal)

  • J. Carlos Pernías-Cerrillo


    (Economics Department, Universitat Jaume I, Castellón, Spain)

We study the evolution of prices in markets assisted by price-comparison engines. We use laboratory data obtained under two industry sizes and two conditions concerning the sample (complete, incomplete) of prices available to informed consumers. Distributions are typically bimodal. One of the two modes, corresponding to monopoly prices, tends to increasingly attract prices over time. The second one, corresponding to interior prices, presents a decreasing trend. Monopoly pricing can be used as an insurance against more competitive (but riskier) behavior. In fact, subjects earning low profits due to interior pricing in the past are more likely to choose monopoly pricing.

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Paper provided by Economics Department, Universitat Jaume I, Castellón (Spain) in its series Working Papers with number 2013/05.

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Length: 27 pages
Date of creation: 2013
Date of revision:
Handle: RePEc:jau:wpaper:2013/05
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  1. Aurora García-Gallego & Nikolaos Georgantzís & Pedro Pereira & José C. Pernías-Cerrillo, 2004. "Risk Attitudes and Internet Search Engines: Theory and Experimental Evidence," Working Papers 04-03, NET Institute, revised Oct 2004.
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  9. Michael R. Baye & John Morgan, 2004. "Price Dispersion in the Lab and on the Internet: Theory and Evidence," Working Papers 2004-02, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
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  19. Cason, T. & Friedman, D. & Wagener, F.O.O., 2003. "The dynamics of price dispersion, or Edgeworth variations," CeNDEF Working Papers 03-11, Universiteit van Amsterdam, Center for Nonlinear Dynamics in Economics and Finance.
  20. Maarten C. W. Janssen & José Luis Moraga-González, 2004. "Strategic Pricing, Consumer Search and the Number of Firms," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1089-1118, October.
  21. Leola B. Ross, . "When Will an Airline Stand Its Ground? An Analysis of Fare Wars," Working Papers 9703, East Carolina University, Department of Economics.
  22. 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.
  23. Kocas, Cenk & Kiyak, Tunga, 2006. "Theory and evidence on pricing by asymmetric oligopolies," International Journal of Industrial Organization, Elsevier, vol. 24(1), pages 83-105, January.
  24. Leola Ross, 1997. "When Will an Airline Stand Its Ground? An Analysis of Fare Wars," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 4(2), pages 109-127.
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