Do Smartphones Spur Competition? Evidence from the Korean Retail Gasoline Market

44 Pages Posted: 13 Mar 2014 Last revised: 30 Mar 2014

See all articles by Woo-Hyung Hong

Woo-Hyung Hong

Department of Economics, University of Washington

Date Written: March 20, 2014

Abstract

Limited or costly information generates excess price dispersion across markets causing market inefficiency. In this setting, smartphones, as information-providing devices, can improve market performance. This paper explores the Korean retail gasoline market as a natural experimental field to investigate the impact of smartphones on competition among gas stations. In this particular market, smartphones have provided consumers with direct access to gasoline price information from the pre-existing information channel called OPINET, a government-sponsored Internet website. Our results are consistent with the relevant theory: the adoption of smartphones is associated with dramatic decreases in both price dispersion and average price-cost margins, thereby creating huge consumer gains. In addition, we found a sudden drop in entries along with a slow rise in exits after the introduction of the smartphones.

Keywords: information, smartphone, search cost, price dispersion, IT innovation, Korean gasoline market

JEL Classification: D43, D83, L15, L84, R32

Suggested Citation

Hong, Woo-Hyung, Do Smartphones Spur Competition? Evidence from the Korean Retail Gasoline Market (March 20, 2014). Available at SSRN: https://ssrn.com/abstract=2407732 or http://dx.doi.org/10.2139/ssrn.2407732

Woo-Hyung Hong (Contact Author)

Department of Economics, University of Washington ( email )

Box 353330
Seattle, WA 98195-3330
United States

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