Search, Obfuscation, and Price Elasticities on the Internet

54 Pages Posted: 4 Jul 2004 Last revised: 19 Jun 2014

See all articles by Glenn Ellison

Glenn Ellison

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Sara Fisher Ellison

Massachusetts Institute of Technology (MIT) - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: June 2004

Abstract

We examine the competition between a group of Internet retailers that operate in an environment where a price search engine plays a dominant role. We show that for some products in this environment, the easy price search makes demand tremendously price-sensitive. Retailers, though, engage in obfuscation---practices that frustrate consumer search or make it less damaging to firms---resulting in much less price sensitivity on other products. We discuss several models of obfuscation and examine its effects on demand and markups empirically. Observed markups are adequate to allow efficient online retailers to survive.

Suggested Citation

Ellison, Glenn David and Fisher Ellison, Sara, Search, Obfuscation, and Price Elasticities on the Internet (June 2004). NBER Working Paper No. w10570. Available at SSRN: https://ssrn.com/abstract=557204

Glenn David Ellison (Contact Author)

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

50 Memorial Drive
Room E52-380B
Cambridge, MA 02142
United States
617-253-8702 (Phone)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Sara Fisher Ellison

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

50 Memorial Drive
Room E52-262C
Cambridge, MA 02142
United States
617-253-3821 (Phone)
617-253-1330 (Fax)

Register to save articles to
your library

Register

Paper statistics

Downloads
48
Abstract Views
1,920
PlumX Metrics