Entry, exit, and pricing strategies at online price-comparison sites: Do price markups fall by themselves, or is competition crucial?

Franz Hackl, Michael Kummer, Rudolf Winter-Ebmer and Christine Zulehner

No 2/2013, ZEW policy briefs from ZEW - Leibniz Centre for European Economic Research

Abstract: The aim of this project is to investigate the competitive behaviour of e-commerce firms over the course of the product lifecycle for consumer electronics such as digital cameras, IT hardware, and smartphones. We combine data from Austria's largest online price comparison site with retail data provided by an industry-specific price comparison site for consumer electronics. This aggregated database enables us to record firms' input prices as well as to monitor the various moves each firm makes with regard to strategic market entry and pricing for hundreds of product markets. Insight into e-tailers' market behaviour is key to understanding online markets, which are reaping an ever greater share of retail sales each year. Yet antitrust and regulatory authorities are also interested in knowing how many firms are needed to sustain competition within a market, for merger assessments focus in part on the expected relation between the number of firms in a given market and corresponding market outcomes, i.e. product price and quality. Clearly, questions related to competition and pricing are of central importance to society and the public, as a minimum level of competition is needed to ensure sufficient supply of a product at reasonable prices.

Date: 2013
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