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  5. Sources of Limited Consideration and Market Power in E-Commerce

American Economic Journal:
Microeconomics

ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)

Sources of Limited Consideration and Market Power in E-Commerce

  • Michael Rolland Sullivan
American Economic Journal: Microeconomics (Forthcoming)

Abstract

This article develops techniques for the empirical analysis of repeated sequential search over unordered alternatives using data on consumer search processes. I use these techniques to assess why consumers conduct little search in e-commerce and often pay significantly above the minimum available price for a product. Search costs could explain these facts, as could pre-search seller differentiation: consumers with low search costs may not visit stores they dislike based on information known before search. I find that seller differentiation is primarily responsible for limited consideration and market power.

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