Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets

53 Pages Posted: 11 Apr 2000

See all articles by Michael R. Baye

Michael R. Baye

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

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group

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Abstract

We examine the equilibrium interaction between a market for price information (controlled by a gatekeeper) and the homogenous product market it serves. The gatekeeper charges fees to firms that advertise prices on its Internet site and to consumers who access the list of advertised prices. Gatekeeper profits are maximized in an equilibrium where (a) the product market exhibits price dispersion; (b) access fees are sufficiently low that all consumers subscribe; (c) advertising fees exceed socially optimal levels, thus inducing partial firm participation; and (d) advertised prices are below unadvertised prices. Introducing the market for information has ambiguous social welfare effects.

JEL Classification: D4, D8, M3, L13

Suggested Citation

Baye, Michael Roy and Morgan, John, Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets. Available at SSRN: https://ssrn.com/abstract=215168 or http://dx.doi.org/10.2139/ssrn.215168

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)

John Morgan (Contact Author)

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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