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Search, Obfuscation, and Price Elasticities on the Internet
Author(s) -
Ellison Glenn,
Ellison Sara Fisher
Publication year - 2009
Publication title -
econometrica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 16.7
H-Index - 199
eISSN - 1468-0262
pISSN - 0012-9682
DOI - 10.3982/ecta5708
Subject(s) - obfuscation , the internet , competition (biology) , economics , microeconomics , price elasticity of demand , price discrimination , advertising , industrial organization , business , econometrics , computer science , computer security , ecology , biology , world wide web
We examine the competition between a group of Internet retailers who operate in an environment where a price search engine plays a dominant role. We show that for some products in this environment, the easy price search makes demand tremendously price‐sensitive. Retailers, though, engage in obfuscation—practices that frustrate consumer search or make it less damaging to firms—resulting in much less price sensitivity on some other products. We discuss several models of obfuscation and examine its effects on demand and markups empirically.