Mixed pricing in online marketplaces

Katja Seim () and Michael Sinkinson ()
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Katja Seim: University of Pennsylvania
Michael Sinkinson: University of Pennsylvania

Quantitative Marketing and Economics (QME), 2016, vol. 14, issue 2, No 2, 129-155

Abstract: Abstract A rich theory literature predicts mixed strategies in posted prices due to standard price discrimination, search frictions, and various other rationales. While typically interpreted as implying occasional sales or price dispersion, online marketplaces enable a firm to truly use randomization as a tool in pricing, and so such behavior should be expected to arise in online settings. We investigate a case of mixed pricing across a large subset of products on a major e-commerce website. We first test for randomizing behavior, and then construct a model of price discrimination that would generate randomization as optimal behavior. We estimate the model and use it to assess pricing effects of a proposed merger in the industry.

Keywords: Price discrimination; Online markets; Merger analysis (search for similar items in EconPapers)
JEL-codes: D43 L11 L41 L81 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (14)

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DOI: 10.1007/s11129-016-9168-3

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