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Risk Attitudes and Internet Search Engines: Theory and Experimental Evidence

Author

Listed:
  • Aurora García-Gallego

    (Universitat Jaume I (Castellón, Spain))

  • Nikolaos Georgantzís

    (Universitat Jaume I (Castellón, Spain))

  • Pedro Pereira

    (Autoridade da Concorrência (Portugal))

  • José C. Pernías-Cerrillo

    (Universitat Jaume I (Castellón, Spain))

Abstract

This paper analyzes the impact on consumer prices of the size and biases of price comparison search engines. We develop several theoretical predictions, in the context of a model related to Burdett and Judd (1983) and Varian (1980), and test them experimentally. The data supports the model’s predictions regarding the impact of the number of firms, and the type of bias of the search engine. The data does not support the model’s predictions regarding the impact of the size of the search engine. We identified several data patterns, and developed an econometric model for the price distributions. Variables accounting for risk attitudes improved significantly the explanatory power of the econometric model.

Suggested Citation

  • 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.
    • Handle: RePEc:net:wpaper:0403
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    References listed on IDEAS

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    5. 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.
    6. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    7. 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 1575-1579, September.
    8. 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.
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    Cited by:

    1. Aurora García-Gallego & Nikolaos Georgantzís & Pedro Pereira & José C. Pernías-Cerrillo, 2005. "Competing Against Simulated Equilibrium Price Dispersions: An Experiment On Internet-Assisted Search Markets," Working Papers 05-12, NET Institute.
    2. 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.
    3. Cason, Timothy N. & Datta, Shakun, 2006. "An experimental study of price dispersion in an optimal search model with advertising," International Journal of Industrial Organization, Elsevier, vol. 24(3), pages 639-665, May.

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    More about this item

    Keywords

    Search engines; incomplete information; biased information; price levels; experiments;
    All these keywords.

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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