Clicks, Discontinuities, and Firm Demand Online

41 Pages Posted: 26 Oct 2009

See all articles by Michael R. Baye

Michael R. Baye

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy

Rupert Gatti

University of Cambridge - Faculty of Economics

Paul Kattuman

University of Cambridge - Judge Business School

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group

Abstract

We exploit a unique dataset from a price comparison site to estimate the determinants of clicks received by online retailers. We find that a firm enjoys a 60% jump in its clicks when it offers the lowest price at the site, and failure to account for discontinuities distorts parameter estimates by nearly 100%. This discontinuity is consistent with a variety of models that have been used to rationalize online price dispersion. Finally, we show that one may use estimates of the determinants of a firm's clicks to obtain bounds on its underlying demand parameters, including standard elasticities of demand.

Suggested Citation

Baye, Michael Roy and Gatti, J. Rupert J. and Kattuman, Paul A. and Morgan, John, Clicks, Discontinuities, and Firm Demand Online. Journal of Economics & Management Strategy, Vol. 18, Issue 4, pp. 935-975, Winter 2009. Available at SSRN: https://ssrn.com/abstract=1492374 or http://dx.doi.org/10.1111/j.1530-9134.2009.00234.x

Michael Roy Baye

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-855-2779 (Phone)
812-855-3354 (Fax)

J. Rupert J. Gatti

University of Cambridge - Faculty of Economics ( email )

Austin Robinson Building
Sidgwick Avenue
Cambridge, CB3 9DD
United Kingdom
+44 1223 339929 (Phone)

Paul A. Kattuman

University of Cambridge - Judge Business School ( email )

Trumpington Road
Cambridge CB2 1AG
United Kingdom
+44 1223 764 136 (Phone)

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group ( email )

Berkeley, CA 94720
United States
510-642-2669 (Phone)
810-885-5959 (Fax)

HOME PAGE: http://faculty.haas.berkeley.edu/rjmorgan/

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