Identification and Estimation of Online Price Competition with an Unknown Number of Firms

23 Pages Posted: 22 Mar 2016 Last revised: 12 Apr 2017

See all articles by Yonghong An

Yonghong An

Texas A&M University

Michael R. Baye

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

Yingyao Hu

Johns Hopkins University - Department of Economics

John Morgan

University of California, Berkeley - Economic Analysis & Policy Group

Matthew Shum

California Institute of Technology

Date Written: August 1, 2015

Abstract

This paper considers identification and estimation of a general model for online price competition. We show that when the number of competing firms is unknown, the underlying parameters of the model can still be identified and estimated employing recently developed results on measurement errors. We illustrate our methodology using UK data for personal digital assistants and employ the estimates to simulate competitive effects. Our results reveal that heightened competition has differential effects on the prices paid by different consumer segments.

Keywords: E-Retail Markets, Nonparametric Identification, Structural Estimation

Suggested Citation

An, Yonghong and Baye, Michael Roy and Hu, Yingyao and Morgan, John and Shum, Matthew, Identification and Estimation of Online Price Competition with an Unknown Number of Firms (August 1, 2015). Kelley School of Business Research Paper No. 16-27. Available at SSRN: https://ssrn.com/abstract=2752576 or http://dx.doi.org/10.2139/ssrn.2752576

Yonghong An

Texas A&M University ( email )

3051 Allen Building
4428 TAMU
College Station, TX Texas 77843
United States

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)

Yingyao Hu

Johns Hopkins University - Department of Economics ( email )

3400 Charles Street
Baltimore, MD 21218-2685
United States

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/

Matthew Shum (Contact Author)

California Institute of Technology ( email )

Pasadena, CA 91125
United States

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