Download or read book Competition Pricing and Product Entry in Markets with Costly Search written by Ilya Morozov and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: In the first chapter of this paper, I study how much consumers benefit from new products in markets with information frictions. I analyze new products in the U.S. hard drive market, a market with ample product innovation. Using unique browsing data, I measure the magnitude of two frictions, limited consideration and costly search, and show that both play a crucial role in shaping consumer demand. Omitting these frictions from analysis makes the researcher underestimate consumer surplus from new hard drives, as it appears that consumers do not like the attributes these hard drives offer. Partly eliminating frictions substantially increases consumers' ability to benefit from new hard drives. In the second chapter, I study the estimation of preference heterogeneity in markets where consumers engage in costly search to learn product characteristics. Costly search amplifies the way consumer preferences translate into purchase probabilities, generating a seemingly large degree of preference heterogeneity. We develop a search model that allows for flexible heterogeneity in preferences and estimate its parameters using a unique panel dataset on the search and purchase behavior of consumers. The estimation results reveal that when search costs are ignored, the model overestimates standard deviations of product intercepts by 68%. We show that the bias in heterogeneity estimates leads to incorrect inference about price elasticities and seller markups and has important consequences for targeted marketing.
Download or read book Price directed Search Product Differentiation and Competition written by Martin Obradovits and published by . This book was released on 2022 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: Especially in many online markets, consumers can readily observe prices, but may need to further inspect products to assess their suitability. We study the effects of product differentiation and search costs on competition and market outcomes in a tractable model of price-directed consumer search. We find that (i) firms' equilibrium pricing always induces efficient search behavior, (ii) for relatively large product differentiation, welfare distortions still occur because some consumers (may) forgo consumption, and (iii) lower search costs lead to stochastically higher prices, increasing firms' expected profits and decreasing their frequency of sales. Consumer surplus often falls when search costs decrease.
Download or read book Sunk Costs and Market Structure written by John Sutton and published by MIT Press. This book was released on 1991 with total page 600 pages. Available in PDF, EPUB and Kindle. Book excerpt: Sunk Costs and Market Structure bridges the gap between the new generation of game theoretic models that has dominated the industrial organization literature over the past ten years and the traditional empirical agenda of the subject as embodied in the structure-conduct-performance paradigm developed by Joe S. Bain and his successors.
Download or read book Pricing Product Diversity and Search Costs written by Simon P. Anderson and published by . This book was released on 2000 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We study price competition in the presence of search costs and product differentiation. The limit cases of the model are the "Bertrand Paradox," the "Diamond Paradox," and Chamberlinian monopolistic competition. Market prices rise with search costs and decrease with the number of firms. Prices may initially fall with the degree of product differentiation because more diversity leads to more search and more competition. Equilibrium diversity rises with search costs, while the optimum level falls, so entry is excessive. The market failure is most pronounced for low preference for variety and high search costs.
Download or read book The Competitive Dynamics of Entrepreneurial Market Entry written by Gideon Markman and published by Edward Elgar Publishing. This book was released on 2011 with total page 553 pages. Available in PDF, EPUB and Kindle. Book excerpt: Research on general market entry usually focuses on large enterprises. Often, however, small entrants can alter the competitive dynamics of an industry. This volume brings together the most prominent thought leaders and the best research on the asymmetric entrant-incumbent dynamics. The ideas presented offer a more nuanced perspective on how, when, where and with what consequences small, single-product firms enter markets that are dominated by large, multiproduct and multimarket incumbents. Large enterprises often enjoy a number of advantages that young, small ventures (as well as matured, but still small firms) lack. These differences manifest not only in how large and small firms operate and in their resource-capability mix, but also in how they compete and interact with each other. Research on general market entry and competitive dynamics is extensive yet it focuses on entrants and incumbents that are of similar profile - similar size, comparable asset mixes, related product strategies, and equivalent organizational capabilities. The unique contribution of this volume is its concentration on asymmetric entrant-incumbent dynamics. Scholars and students in entrepreneurship, strategy, international business and related fields will find this excellent collection of key published and original material illuminating.
Download or read book Market Investigations written by Massimo Motta and published by Cambridge University Press. This book was released on 2022-01-06 with total page 411 pages. Available in PDF, EPUB and Kindle. Book excerpt: In many economic sectors – the digital industries being first and foremost – the market power of dominant firms has been steadily increasing and is rarely challenged by competitors. Existing competition laws and regulations have been unable to make markets more contestable. The book argues that a new competition tool is needed: market investigations. This tool allows authorities to intervene in markets which do not function as they should, due to market features such as network effects, scale economies, switching costs, and behavioural biases. The book explains the role of market investigations, assesses their use in the few jurisdictions where they exist, and discusses how they should be designed. In so doing, it provides an invaluable and timely instrument to both practitioners and academics.
Download or read book A Theory of Monopolistic Competition with Imperfect Consumer Information written by Michael Ray Metzger and published by . This book was released on 1979 with total page 214 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Consumer Search and Price Competition written by Michael Choi and published by . This book was released on 2016 with total page 40 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consider an oligopoly model in which consumers engage in sequential search based on partial product information and advertised prices. We derive a simple condition that fully summarizes consumers' shopping outcomes and use the condition to reformulate the pricing game among the sellers as a familiar discrete-choice problem. Exploiting the reformulation, we provide sufficient conditions that guarantee the existence and uniqueness of pure-strategy market equilibrium and obtain several novel insights about the effects of search frictions on market prices. Among others, we show that a reduction in search costs increases market prices, but providing more pre-search information raises market prices if and only if there are sufficiently many sellers.
Download or read book Search Costs Demand Structure and Long Tail in Electronic Markets written by Anindya Ghose and published by . This book was released on 2014 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: It is well known that the Internet has significantly reduced consumers' search costs online. But relatively little is known about how search costs affect consumer demand structure in online markets. In this paper, we identify the impact of search costs on firm competition and market structure by exploring a unique theoretical insight that search costs create a kink in aggregate demand when firms change prices. The significance of the kink reflects the magnitude of online search costs and the kinked demand function provides information on how search costs affect competition in the online market. Using a dataset collected from Amazon and Barnes & Noble, we find that search costs vary significantly across online retailers. Consumers face low search costs for price information from Amazon.com. It leads to a higher price elasticity when the firm reduces prices than when it increases prices, increasing Amazon's incentive to engage in price competition. On the other hand, consumers face relatively higher search costs for price information from Barnes & Noble. This leads to a lower price elasticity when Barnes & Noble reduces prices than when it increases prices, reducing Barnes & Noble's incentive to engage in price competition. We also find that search costs decrease with the passage of time as the information about price changes dissipates among consumers, leading to increased price elasticity over time. Finally, we highlight that search costs are lower for popular books compared to rare and unpopular books. These findings have implications for the impact of the Internet on the Long Tail phenomenon.
Download or read book The effect of asymmetric entry costs on Bertrand competition written by and published by DIANE Publishing. This book was released on with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt:
Download or read book Optimal Pricing Inflation and the Cost of Price Adjustment written by Eytan Sheshinski and published by MIT Press. This book was released on 1993 with total page 546 pages. Available in PDF, EPUB and Kindle. Book excerpt: These collected articles constitute what is perhaps the definitive study of pricing models under inflation, providing a solid basis for further research on this elusive question. What are the real effects of inflation? These collected articles constitute what is perhaps the definitive study of pricing models under inflation, providing a solid basis for further research on this elusive question. Covering a broad range of theory and applications by well-known microeconomists, the eighteen contributions evaluate the effects of inflation on aggregate output and on welfare and reveal the scope of recent efforts to explicitly incorporate frictions in economic models. A basic building block common to most of the essays in this volume is the observation that individual firms change nominal prices intermittently. The frequency and size of nominal price changes are influenced by the cost of price adjustment and changes in the economic environment, production costs, market demand, market structure, and most important, inflation. Thus the degree of nominal rigidity is influenced by the economic environment, and in a dynamic context. Two introductory essays survey the empirical studies of pricing policies by individual firms and the theoretical efforts to integrate the nominal rigidities at the micro level into macro relationships. The essays that follow treat the general problem of optimal dynamic adjustment in the presence of convex costs of adjustment, include applications of the inventory models to the case of nominal price adjustment by an individual firm, address the question of aggregation, introduce active search by consumers, and provide empirical analysis of nominal price rigidities.
Download or read book Search Availability and Competition in Product Ranges written by Randal Watson and published by . This book was released on 2006 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: I study competition in product ranges between firms selling differentiated varieties of a product to consumers who use sequential search to collect information about prices and tastes for the available varieties. Competition in product ranges is recast as a competition in providing availability of different items, abstracting away from the impact of a product-range extension on the expected quality of a consumer's most-preferred item at any given firm. When the number of firms is fixed, prices, profits, and per-firm availability are increasing in consumers' search costs. As the number of entrants increases per-firm profits and availability decrease, but price surprisingly increases, in contrast to results from the model where firms are restricted to a single product. Under free-entry the long-run effect of higher search costs on per-firm availability is either zero or positive, depending on whether consumers get positive expected surplus from active search. In contrast with the previous literature the long-run effect of higher search costs on the number of entrants is U-shaped, being first positive and then negative. If consumers are initially actively searching across firms, a large enough increase in search costs leads to fewer firms in the market, each with a broader product range.
Download or read book Competitive Pricing and Efficiency in Search Equilibrium written by Dale T. Mortensen and published by . This book was released on 2004 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We consolidate and generalize some results on price determination and efficiency in search equilibrium. Extending models by Rubinstein and Wolinsky and by Gale, heterogeneous buyers and sellers meet according to a general matching technology and prices are determined by a general bargaining condition. When the discount rate 'r' and search costs converge to 0, we show that prices in all exchanges are the same and equal the competitive, market clearing, price. Given positive search costs, efficiency obtains iff bargaining satisfies Hosios' condition and r = 0. When prices are set by third-party market makers, however, we show that search equilibrium is necessarily efficient.
Download or read book Competition written by Anna Olimpia and published by Editora Singular. This book was released on 2023-11-08 with total page 291 pages. Available in PDF, EPUB and Kindle. Book excerpt: The proliferation of economic agents with market power, especially those operating in the digital economy and which add unprecedented dynamic and complexity to it, has sparked heated discussions among academics, professionals, and competition authorities around the world regarding the effects of their actions on the market and consumers. Unlike classic cartels – a conduct that has been treated as per se unlawful in Brazil, regardless of the production of effects under Brazilian competition law – unilateral conduct falls into a gray area, encompassing different practices with different effects on the market. In this sense, examples of unilateral conduct that may be considered anticompetitive are numerous, both under old and new labels: predatory pricing, abusive pricing, resale price maintenance, imposition of exclusivities, parity clauses, price discrimination, discrimination of commercial conditions (self-preferencing), price squeeze, refusal to deal, among others. The competition analysis of such conduct – which may occur in traditional "brick and mortar" markets as well as in digital environments involving various platforms and arrangements like blockchain – for the purpose of a decision by the authority on whether they constitute anticompetitive practices or not, involves a highly complex analysis of various factors. The analysis must consider the presence of dominant positions, real or potential detrimental effects on competition, efficiencies, justifications, economic rationale for the conduct, and, for some schools of thought, a weighing of anticompetitive effects and efficiencies. Due to the complexity, specificities, and dynamism of unilateral practices, especially in digital markets or hybrid digital platforms, there is a question of whether the instruments currently available to competition authorities are sufficient to understand and rule on such practices. In this regard, the analysis of various cases in relatively recent jurisprudence shows a pursuit for new forms of interpretation and application, and even updates, to the methodologies of analysis and of applicable legislation, in order to strike a balance between intervention to curb anticompetitive practices to the extent necessary for protecting competition, without resulting on undue interference in the involved markets or on disincentives to innovation. Historically, discussions about exclusivity clauses and resale price maintenance have been central in this type of investigation, but digital platforms are effectively changing this landscape, giving rise to discussions on new types of conduct or more sophisticated forms of implementing traditional types of conduct, which have become possible or potentially more serious through new technologies, the broad reach of platforms, the collection of massive data, and the international nature of the largest players in these markets. Notions of relevant market, theories of harm, and standards of consumer welfare or protection traditionally adopted by antitrust authorities are under study and may be revised. The heterogeneity of legal systems in different jurisdictions is another complicating factor for national authorities in the analysis of conduct practiced by companies with market power internationally. All these analyses are present in the 25 articles written for this publication by IBRAC. We have articles focused on traditional methods of analysis in traditional markets, as well as articles addressing new trends and recent discussions in digital markets and platforms. In times of pandemic and economic crisis, as expected, approaches to prices and pricing strategies are recurring themes in the works compiled here.
Download or read book Entry Pricing and Product Design in an Initially Monopolized Market written by Steven J. Davis and published by . This book was released on 2009 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: We analyze entry, pricing, and product design in a model with differentiated products. Market equilibrium can be "separating," with multiple sellers and a sorting of heterogeneous consumers across goods, or "exclusionary," with one seller serving all customer types. Entry into an initially monopolized market can occur because of cost reductions or product improvements, but entry need not lower the incumbent's price, improve efficiency, or raise consumer welfare. Postentry design incentives favor a softening of price competition and stronger market segmentation, whereas exclusionary design changes typically raise consumer welfare. Potential, as distinct from actual, entry always benefits consumers.
Download or read book Business Economics written by Alan Griffiths and published by Heinemann. This book was released on 2001 with total page 130 pages. Available in PDF, EPUB and Kindle. Book excerpt: Part of a series which aims to reflect the changing face of the economic climate and business world. The books contain the latest information and thinking in their areas and are specifically focused to the needs of AS, A level and first year undergraduate students.
Download or read book eCommerce Economics written by David VanHoose and published by Taylor & Francis. This book was released on 2011-03-18 with total page 497 pages. Available in PDF, EPUB and Kindle. Book excerpt: This second edition of eCommerce Economics addresses the economic issues associated with using computer-mediated electronic networks, such as the Internet, as mechanisms for transferring ownership of or rights to use goods and services. After studying this book, students will recognize problems that arise in the electronic marketplace, such as how to gauge the competitive environment, what products to offer, how to market those products, and how to price those products. They also will understand the conceptual tools required to evaluate the proper scope of public policies relating to electronic commerce. Core topics covered in the book include the underpinning of electronic commerce and the application of basic economic principles, including the theories of perfect and imperfect competition, to the electronic marketplace. Building on this foundation, the book discusses virtual products, network industries, and business strategies and conduct. Additional key topics include Internet advertising, intellectual property rights in a digital environment, regulatory issues in electronic markets, public sector issues, online banking and finance, digital cash, international electronic trade, and the implications of e-commerce for aggregate economic activity.
