Competing Gatekeepers

Lin Yu-Chen
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Lin Yu-Chen: Center of Research on Transportation, University of Montreal, liny@crt.umontreal.ca

The B.E. Journal of Theoretical Economics, 2007, vol. 7, issue 1, 24

Abstract: We extend the Baye and Morgan (2001) model to study competition between price comparison sites in the information market on the internet. We identify one symmetric sub-game perfect Nash equilibrium in which (1) price comparison sites set the same advertising fees; (2) the same proportion of consumers subscribe to each site; (3) each firm mixes between advertising on all sites and not advertising; and (4) advertised prices are dispersed. The introduction of additional price comparison sites may reduce social welfare and joint profits of price comparison sites. In the equilibrium with each consumer subscribing to one site, as the number of price comparison sites goes to infinity, the information market approaches that without price comparison sites.

Keywords: information gatekeeper; internet shopping; price comparison (search for similar items in EconPapers)
Date: 2007
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DOI: 10.2202/1935-1704.1313

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