Price Dispersion in the Lab and on the Internet: Theory and Evidence
Michael Baye and
No 2004-02, Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy
Price dispersion is ubiquitous in settings that closely approximate textbook Bertrand competition. We show (Propositions 2 and 3) that only a little bounded rationality among sellers is needed to rationalize such dispersion. A variety of statistical tests, based on data sets from two independent laboratory experiments and structural estimates of the parameters of our models, suggest that bounded rationality based theories of price dispersion organize the data remarkably well. Evidence is also presented which suggests that the models are consistent with data from a leading Internet price comparison site.
Keywords: Price; dispersion (search for similar items in EconPapers)
JEL-codes: D43 L13 M3 (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (90) Track citations by RSS feed
Published in Rand Journal of Economics, 2004
Downloads: (external link)
Journal Article: Price Dispersion in the Lab and on the Internet: Theory and Evidence (2004)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:iuk:wpaper:2004-02
Access Statistics for this paper
More papers in Working Papers from Indiana University, Kelley School of Business, Department of Business Economics and Public Policy Contact information at EDIRC.
Bibliographic data for series maintained by Rick Harbaugh ().