Pricing in the shadow of firm turnover: ISPs during the 1990s

Greg Stranger and Shane Greenstein

International Journal of Industrial Organization, 2008, vol. 26, issue 3, 625-642

Abstract: We examine the relationship between changes in price levels and the evolution of the market for dial-up ISPs in the United States from November 1993 to January 1999. This was a period of much entry and exit and new product introduction. We show that new firms enter the market at a small but significant price discount to established incumbents. At the same time, introduction of new products/technologies is priced at a significant price premium to the existing offerings, but the premium declines rapidly. We also find a survivor bias in pricing: ISPs who survive tend to have higher prices than younger firms. This bias interacts with the evolution of the market. Lastly, we find comparatively little role for exit.

Date: 2008
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Persistent link: https://EconPapers.repec.org/RePEc:eee:indorg:v:26:y:2008:i:3:p:625-642

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