Paper #1605
- Títol:
- Beliefs and consumer search in a vertical industry
- Autors:
- Maarten Janssen i Sandro Shelegia
- Data:
- Març 2018
- Resum:
- This paper studies vertical relations in a search market. As the wholesale arrangement between a manufacturer and its retailers is typically unobserved by consumers, their beliefs about who is to be blamed for a price deviation play a crucial role in determining wholesale and retail prices. The common assumption in the consumer search literature is that consumers exclusively blame an individual retailer for a price deviation. We show that in the vertical relations context, predictions based on this assumption are not robust in the sense that if consumers assign just a small probability to the event that the upstream manufacturer is responsible for the deviation, equilibrium predictions are qualitatively di erent. For the robust beliefs, the vertical model can explain a variety of observations, such as retail price rigidity (or, alternatively, low cost pass-through), non-monotonicity of retail prices in search costs, and (seemingly) collusive retail behavior. The model can be used to study a monopoly online platform that sells access to final consumers.
- Paraules clau:
- Vertical relations, consumer search, double marginalization, product differentiation, price rigidities
- Codis JEL:
- D40, D83, L13
- Àrea de Recerca:
- Economia de l'Empresa i Organització Industrial
Descarregar el paper en format PDF