An Empirical Study of Pricing Strategies in an Online Market with High-Frequency Price Information

47 Pages Posted: 13 Mar 2014

See all articles by Sara Fisher Ellison

Sara Fisher Ellison

Massachusetts Institute of Technology (MIT) - Department of Economics

Christopher M. Snyder

Dartmouth College - Department of Economics; National Bureau of Economic Research

Multiple version iconThere are 2 versions of this paper

Date Written: February 21, 2014

Abstract

We study competition among a score of firms participating in an online market for a commodity computer component. Firms were able to adjust prices continuously; prices determined how the firms were ranked and listed (lowest price listed first), with better ranks contributing to firms’ sales. Using a year’s worth of hourly data for individual firms, we estimate a model of price adjustment, characterizing the factors driving price changes and measuring how much these factors differ across firms (i.e., strategy heterogeneity). We find evidence of managerial inattention as a cause of the price inertia observed in the market. Using separate estimates of the pricing model for groups of related firms, we simulate counterfactuals involving different mixes of these groups.

JEL Classification: L110, C730, D210, L810

Suggested Citation

Fisher Ellison, Sara and Snyder, Christopher M., An Empirical Study of Pricing Strategies in an Online Market with High-Frequency Price Information (February 21, 2014). CESifo Working Paper Series No. 4655, Available at SSRN: https://ssrn.com/abstract=2407899

Sara Fisher Ellison (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Christopher M. Snyder

Dartmouth College - Department of Economics ( email )

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HOME PAGE: http://www.dartmouth.edu/~csnyder/

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