Consumer Search and Oligopolistic Pricing: An Empirical Investigation

Maarten C.W. Janssen (), Jose Moraga-Gonzalez and Matthijs Wildenbeest
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Maarten C.W. Janssen: Erasmus University Rotterdam

No 04-071/1, Tinbergen Institute Discussion Papers from Tinbergen Institute

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

Keywords: consumer search; oligopoly; price dispersion; maximum likelihood estimation (search for similar items in EconPapers)
JEL-codes: C13 D40 L13 (search for similar items in EconPapers)
Date: 2004-06-29
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Citations: View citations in EconPapers (1)

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Working Paper: Consumer Search and Oligopolistic Pricing: An Empirical Investigation (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:tin:wpaper:20040071

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