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On the evolution of monopoly pricing in Internet-assisted search markets

Aurora García-Gallego (), Nikolaos Georgantzís (), Ainhoa Jaramillo-Gutiérrez (), Pedro Pereira and J. Carlos Pernías-Cerrillo

Journal of Business Research, 2014, vol. 67, issue 5, 795-801

Abstract: This study examines the evolution of prices in markets with Internet price-comparison search engines. The empirical study analyzes laboratory data of prices available to informed consumers, for two industry sizes and two conditions on the sample (complete and incomplete). Distributions are typically bimodal. One of the two modes of distribution, corresponding to monopoly pricing, tends to attract such pricing strategies increasingly over time. The second one, corresponding to interior pricing, follows a decreasing trend. Monopoly pricing can serve as a means of insurance against more competitive (but riskier) behavior. In fact, experimental subjects who initially earn low profits due to interior pricing are more likely to switch to monopoly pricing than subjects who experience good returns from the start.

Keywords: Internet economics; Price-comparison search engines; Mixed strategy equilibria; Experimental economics (search for similar items in EconPapers)
Date: 2014
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DOI: 10.1016/j.jbusres.2013.11.047

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