Price Competition in the Presence of a Web Aggregator

Oksana Loginova () and Andrea Mantovani

No 1616, Working Papers from Department of Economics, University of Missouri

Abstract: In this paper we examine the impact of a web aggregator on firms and consumers in a horizontally differentiated market. When a firm pays a fee to be listed on the aggregator's website, its location and price become observable to e-users (consumers who visit the website). We consider two settings, depending on the possibility for online firms to offer discounts to e-users. In equilibrium, not all firms will go online - some will choose to remain offline. Online firms attract more customers due to reduced mismatch costs, but face a tougher price competition. When the proportion of e-users is relatively low, price discrimination may hurt the firms. Therefore, less of them can afford to go online. The opposite holds when e-users predominate; price discrimination yields a higher number of online restaurants than uniform pricing. Finally, we evaluate the aggregator's optimal policy regarding the fee and whether to impose uniform pricing or to allow price discrimination. We discover that, unless the proportion of e-users is relatively low, the aggregator induces only a few restaurants to go online.

Keywords: online reviews aggregators; price discrimination; competition (search for similar items in EconPapers)
JEL-codes: C72 D43 D61 L11 L13 M31 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2016
New Economics Papers: this item is included in nep-bec, nep-com, nep-ict, nep-mic, nep-mkt and nep-net
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Journal Article: Price competition in the presence of a web aggregator (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:umc:wpaper:1616

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