Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

A Member of the Law Professor Blogs Network

Wednesday, January 27, 2010

Conditioning prices on search behaviour

Posted by D. Daniel Sokol

Mark Amstrong (UCL - Econ) and Jidong Zhou  (UCL - Econ) explain Conditioning prices on search behaviour.

ABSTRACT: We consider a market in which firms can partially observe each consumer's search behavior in the market. In our main model, a firm knows whether a consumer is visiting it for the first time or whether she is returning after a previous visit. Firms have an incentive to offer a lower price on a first visit than a return visit, so that new consumers are offered a "buy-now" discount. The ability to offer such discounts acts to raise all prices in the market. If firms cannot commit to their buy-later price, in many cases firms make "exploding" offers, and consumers never return to a previously sampled firm. Likewise, if firms must charge the same price to all consumers, regardless of search history, we show that they sometimes have the incentive to make exploding offers. We also consider other ways in which firms could use information about search behaviour to determine their prices.

http://lawprofessors.typepad.com/antitrustprof_blog/2010/01/conditioning-prices-on-search-behaviour-.html

| Permalink

TrackBack URL for this entry:

http://www.typepad.com/services/trackback/6a00d8341bfae553ef0120a809abc6970b

Listed below are links to weblogs that reference Conditioning prices on search behaviour :

Comments

Post a comment