Essays on competition between price comparison sites and pricing behaviors of firms on the Internet

• Main Author: Lin, Yu-Chen
• Format: Dissertation
• Language: English
• Published: ProQuest Dissertations & Theses 01.01.2005
• Subjects: Advertising; Behavior; Business costs; Business to business commerce; Commerce-Business; Competition; Consumers; Costs; Equilibrium; Essays; Fees & charges; Incentives; Internet; Marketing; Price levels; Prices; Shopping; Studies; Websites
• ISBN: 9780542308161; 0542308169

My dissertation consists of three chapters. In the first chapter, I study entry decisions of price comparison sites in the internet information market. I show that even if each consumer observes price quotations from all price comparison sites, potential entrants do not find it optimal to enter a market monopolized by an incumbent price comparison site. My results imply that the more “bargain hunters” exist in the population, or the higher the value of the good, the fewer the number of price comparison sites that the information market can support. The second chapter addresses the question of whether there exist equilibria in which multiple price comparison sites coexist in the market. I identify two types of strategy profiles as symmetric equilibria. In both types of equilibria, the two price comparison sites coexist in the market and make positive profits. Social welfare is lower with two sites than with only one site. Moreover, the main results extend to the case where there are more than two sites. My third chapter examines pricing behaviors of firms on two leading price comparison sites—Cnet.shopper.com and Nextag.com, using data collected from these two sites in a four-month period. I find evidence supporting the hypothesis that firms on Cnet use price to signal their product quality. Moreover, I find that (1) prices on Cnet are about 5% higher than on Nextag; (2) less than 10% of the firms that advertise on both sites charge different prices.