Research and Publications
Consumer Search and Pricing Behavior in Internet Markets”
2007, Internet and Digital Economics
Maarten C.W. Janssen, José Luis Moraga-González, Matthijs R. Wildenbeest
Despite the mixed empirical evidence, many economists hold the view that Internet will promote competition, thereby lowering prices and price dispersion and increasing welfare. One of the main reasons is that consumers find it easier to search on the Internet, thereby comparing the different price offers that are available. This article presents an overview of the existing empirical literature and provides a search model that helps understand some of the forces behind the mixed empirical evidence. The search model has two types of consumers: those who are fully informed (for example, because they use search engines) and those who are not (they search themselves). More search intensity is reflected then in two parameters: a reduction in search cost for those who search themselves and/or an increase in the search engine rate of adoption (an increase in the fraction of consumers who use search engines). The comparative statics results derived from the model may explain the controversial empirical evidence found so far.
Janssen, Maarten C.W., José Luis Moraga-González, and Matthijs R. Wildenbeest (2007), "Consumer Search and Pricing Behavior in Internet Markets," in Eric Brousseau and Nicolas Curien (eds.), Internet and Digital Economics, Cambridge University Press, pp. 460-483.
Internet, Price dispersion, Search, Search agents