Author: Ambarish Chandra
Publisher:
ISBN:
Category :
Languages : en
Pages : 35
Get Book Here
Book Description
This paper studies the role of imperfect information in explaining price dispersion. We use a new panel dataset on the U.S. retail gasoline industry, and propose a new test of temporal price dispersion to establish the importance of consumer search. We show that price rankings vary significantly over time; however, they are more stable among stations at the same street intersection. We establish the equilibrium relationships between price dispersion and key variables from consumer search models. Price dispersion increases with the number of firms in the market, decreases with the production cost and increases with search costs.
Author: Michael D. Noel
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
The vast majority of empirical studies examining the link between consumer search and price dispersion focus on how changes in consumer search impact price dispersion. This article does the reverse--it examines how a shock to price dispersion impacts consumer search. A direct measure of search is used and an exogenous shock to price dispersion is found in a refinery fire that caused decades-old retail gasoline price cycles, and the nonlinear high-frequency price dispersion pattern generated by them, to stop. Identifying effects from this shock, the results show a substantial response of consumer search to changes in price dispersion.
Author: Mariano Emilio Tappata
Publisher:
ISBN:
Category : Consumer behavior
Languages : en
Pages : 168
Get Book Here
Book Description
In Chapter I, I explore the theoretical implications of consumer search on price dynamics. Previous empirical work established that in most markets "prices rise like rockets but fall like feathers." I show that a model with competitive firms and rational partially-informed consumers can generate such asymmetric response to costs by firms. In contrast to public opinion and past work, collusion is not necessary to explain such stylized fact.
Author: Matthew S. Lewis
Publisher:
ISBN:
Category :
Languages : en
Pages : 0
Get Book Here
Book Description
This article proposes a new explanation for why retail prices respond more quickly to cost increases than cost decreases. I develop a search model that assumes consumers' expectations of prices are based on prices observed during previous purchases. This model predicts that consumers search less when prices are falling, which results in higher profit margins and a slower price response to cost changes. I then empirically examine patterns of retail gasoline price response and price dispersion to show that this model predicts observed price behavior better than previously suggested explanations.
Author: Hakan Yilmazkuday
Publisher:
ISBN:
Category :
Languages : en
Pages : 26
Get Book Here
Book Description
This paper investigates whether consumer search behavior differs across zip codes within the U.S.. As an application, daily gasoline price data covering virtually all gas stations within the U.S. are employed to estimate the distribution of search costs in each zip code. The results show that there are significant differences across zip codes regarding the expected number of searches achieved before consumers purchase gasoline. In order to have a systematic explanation, such differences are further connected to geographic, demographic and economic conditions of the zip codes in a secondary analysis. The corresponding results imply several strategies for gas stations in order to maximize profits/markups; suggestions follow for policy makers and regulators to reduce redistributive effects of information barriers across locations.
Author: Mitsukuni Nishida
Publisher:
ISBN:
Category :
Languages : en
Pages :
Get Book Here
Book Description
Author: Mitsukuni Nishida
Publisher:
ISBN:
Category :
Languages : en
Pages : 41
Get Book Here
Book Description
Information frictions play a key role in an array of economic activities and are frequently incorporated into formal models as search costs. However, little is known about the underlying source of consumer search costs and how heterogeneous they are across consumers and markets. This paper documents the sources and magnitude of heterogeneity in consumer search costs and analyzes how the heterogeneity shapes firms' pricing and consumers' search behavior. By identifying hundreds of geographically isolated markets, we are the first to estimate the distribution of consumer search costs for many geographic markets. We directly recover the distribution of consumer search costs market by market using retail gasoline price data in the United States. We find that the distribution of consumer search costs varies significantly across geographic markets and that the distribution of household income is closely associated with the search cost distribution. We find that a policy that reduces both the standard deviation and mean of the search cost distribution has heterogeneous and potentially unintended consequences on prices across markets.
Author: Alex Maurizi
Publisher:
ISBN:
Category : Business & Economics
Languages : en
Pages : 92
Get Book Here
Book Description
Author: David P. Byrne
Publisher:
ISBN: 9780734051288
Category :
Languages : en
Pages :
Get Book Here
Book Description
Author: Anna Olga Smolnik
Publisher: Cuvillier Verlag
ISBN: 3736984669
Category : Business & Economics
Languages : en
Pages : 124
Get Book Here
Book Description
The dissertation consists of three empirical studies and takes a closer look at price fluctuations using German gasoline prices as an example for a homogenous good. It analyzes consumers’ reaction to price fluctuations and respectively the pricing behavior of firms. The first paper, which was developed with co-authorship, explores consumers’ online price search effects on the pricing behavior of firms (gasoline price level and price dispersion). As regulators have recently implemented a mechanism for reporting all price changes to a central data base, the core assumption of this price reporting scheme is that the increase in price transparency will lead to a decline in the price level and a reduction in price dispersion. The second study addresses the question whether German gas stations adjust their retail prices asymmetrically in response to crude oil price changes, i.e., whether gas stations react quicker to crude oil price increases than to crude oil price decreases. The third study aims to analyze whether consumers react more strongly to gasoline price increases or to price decreases when considering buying a new vehicle.
