Incumbency Advantages: Price Dispersion, Price Discrimination and Consumer Search at Online Platforms

Gugler K, Heim S, Janssen M, Liebensteiner M (2023)

Publication Type: Journal article, Original article

Publication year: 2023

Journal

Journal of Political Economy Microeconomics The University of Chicago Press

Book Volume: 1

Article Number: forthcoming

Journal Issue: 3

URI: https://www.journals.uchicago.edu/doi/10.1086/725335

DOI: 10.1086/725335

Open Access Link: https://www.journals.uchicago.edu/doi/10.1086/725335

Abstract

When firms can make certain prices only available to consumers who search for lower prices, they can price discriminate between consumers with lower and higher search costs. We study one such an environment. Consumers in local German electricity retail markets pay the baseline tariff of their incumbent if they do not search. To observe prices of other firms, they can access an online platform where the incumbent may also post another tariff. Pricing and search patterns differ substantially across local markets. Using panel data, we show that in local markets where more consumers search, incumbents have higher baseline tariffs, while online tariffs of the incumbents and entrants are lower. In a theoretical model, we discuss under which conditions an incumbent has an incentive to further differentiate its tariffs with more consumer search and whether regulators should consider banning such price discrimination practices.

Authors with CRIS profile

Mario Liebensteiner Juniorprofessur für Wirtschaftswissenschaften (Energiemärkte und Energiesystemanalyse)

Involved external institutions

Universität Wien / University of Vienna AT Austria (AT) Wirtschaftsuniversität Wien (WU) AT Austria (AT) Mines ParisTech / École Nationale Supérieure des Mines de Paris (ENSMP) FR France (FR)

How to cite

APA:

Gugler, K., Heim, S., Janssen, M., & Liebensteiner, M. (2023). Incumbency Advantages: Price Dispersion, Price Discrimination and Consumer Search at Online Platforms. Journal of Political Economy Microeconomics, 1(3). https://dx.doi.org/10.1086/725335

MLA:

Gugler, Klaus, et al. "Incumbency Advantages: Price Dispersion, Price Discrimination and Consumer Search at Online Platforms." Journal of Political Economy Microeconomics 1.3 (2023).

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