Consumer Search and Oligopolistic Pricing: An Empirical Investigation

34 Pages Posted: 27 Oct 2004

See all articles by José L. Moraga-González

José L. Moraga-González

VU University Amsterdam; University of Groningen

Maarten Janssen

University of Vienna - Faculty of Business, Economics, and Statistics

Matthijs R. Wildenbeest

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

Date Written: October 2004

Abstract

This paper presents an empirical examination of oligopoly pricing and consumer search. The theoretical model allows for sequential and non-sequential search and, using the theoretical restrictions firm and consumer behavior impose on the data, we study the empirical validity of the models. Two equilibria arise: one with costless search and the other with costly search. We find that the costless search equilibrium works well for products with a relatively low value, and, by implication, a small number of sellers. By contrast, the costly search equilibrium explains the observed data in a manner that is consistent with the underlying theoretical model for almost all products (for 86 out of 87!).

Keywords: consumer search, oligopoly, price dispersion, maximum likelihood estimation

JEL Classification: C13, D40, D83, L13

Suggested Citation

Moraga-Gonzalez, Jose Luis and Janssen, Maarten C. W. and Wildenbeest, Matthijs R., Consumer Search and Oligopolistic Pricing: An Empirical Investigation (October 2004). Available at SSRN: https://ssrn.com/abstract=611063

Jose Luis Moraga-Gonzalez (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

HOME PAGE: http://www.tinbergen.nl/~moraga/

University of Groningen

P.O. Box 800
9700 AV Groningen, Groningen 9700 AV
Netherlands

Maarten C. W. Janssen

University of Vienna - Faculty of Business, Economics, and Statistics ( email )

Vienna, A-1210
Austria

Matthijs R. Wildenbeest

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

Bloomington, IN 47405
United States
812-856-5067 (Phone)
812-855-3354 (Fax)

HOME PAGE: http://www.kelley.iu.edu/mwildenb

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
112
Abstract Views
1,123
rank
289,761
PlumX Metrics