Price Comparison Websites

Abstract

The large and growing industry of price comparison websites (PCWs) or “web aggregators” is poised to benefit consumers by increasing competitive pricing pressure on firms by acquainting shoppers with more prices. However, these sites also charge firms for sales, which feeds back to raise prices. I find that introducing any number of PCWs to a market increases prices for all consumers, both those who use the sites and those who do not. I then use my framework to identify ways in which a more competitive environment could be achieved.

Segmentation versus Agglomeration: Competition between Platforms with Competitive Sellers

“…This leads to price dispersion in equilibrium. This result has been tested empirically (e.g., Brown and Goolsbee, 2002; Baye and Morgan, 2004) and the theoretical framework has been extended (e.g., Ronayne, 2015). In contrast to these papers, we analyze competition between websites in addition to competition between sellers.…”

“…A widely-discussed issue in platform markets is the use of exclusive contracts. 37 Such contracts restrict sellers to offering their products exclusively on one platform (in exchange for a favorable deal on the fee charged by the platform).…”

“…36 See Affeldt, Filistrucchi and Klein (2013) for an application of the SNIPP test to platform markets. 37 For example, in the video game industry, console platforms often impose console exclusivity, which prevents game developers from selling a similar game on rival consoles (see Lee, 2013, for an in-depth analysis). As another example, trading platforms sometimes require 'special' offers by sellers to be exclusive on them.…”

Information vs Competition: How Platform Design Affects Profits and Surplus

“…They also allow us to appreciate the role of the platform in determining the speed at which the market is covered: indeed, we show that the number of transactions taking place in equilibrium is substantially different between revealing and anonymous platforms. 14 Despite having similar appearance, our model is intrinsically different from the literature in which platforms are used as a search device (Baye and Morgan, 2001;Dinerstein et al, 2018;Ronayne, 2021;Ronayne and Taylor, In Press). Indeed, prices in our model 11 Fay (2008) and Shapiro and Shi (2008) are designed to study of how opaqueness may facilitate market segmentation and price discrimination.…”

A Generalized Model of Advertised Sales

“…By drawing on the (symmetric, pure strategy) model of competition in the utility space by Armstrong and Vickers (2001), we let each rm i select its utility, u i , with a per-consumer pro t function, π i ( u i ) , that depends upon the rm s underlying demand, products, costs, and pricing technology. With little increase in computation, this facilitates a high 3 For reviews and recent examples, see Moraga-GonzAElez and Wildenbeest (2012), Armstrong (2015), Spiegler (2016), and Ronayne (2020). For macroeconomic applications to nominal rigidities, output uctuations, and monetary policy, see Guimaraes and Sheedy (2011), Kaplan and Menzio (2016), and Burdett and Menzio (2018).…”