Abstract
We use a competitive search (price-posting) framework to experimentally examine how buyer information and fairness perceptions affect market behavior. We observe that moving from zero to one uninformed buyers leads to higher prices in both 2 (seller)2 (buyer) and 2 3 markets: the former as predicted under standard preferences, the latter the opposite of the theoretical prediction. Perceptions of fair prices-elicited in the experiment-are a powerful driver of behavior. For buyers, fair prices correlate with price responsiveness, which varies systematically across treatments and impacts sellers' pricing incentives. For sellers, fair prices correlate with underpricing, which also varies systematically across treatments.
| Original language | English |
|---|---|
| Pages (from-to) | 1101-1120 |
| Number of pages | 20 |
| Journal | Management Science |
| Volume | 64 |
| Issue number | 3 |
| DOIs | |
| Publication status | Published - 1 Mar 2018 |
Keywords
- Directed search
- Fairness
- Frictions
- Information
- Posted prices
- Price responsiveness
Cite this
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Pricing in competitive search markets : the roles of price information and fairness perceptions. / Anbarci, Nejat; Feltovich, Nick.
In: Management Science, Vol. 64, No. 3, 01.03.2018, p. 1101-1120.Research output: Contribution to journal › Article › Research › peer-review
TY - JOUR
T1 - Pricing in competitive search markets
T2 - the roles of price information and fairness perceptions
AU - Anbarci, Nejat
AU - Feltovich, Nick
PY - 2018/3/1
Y1 - 2018/3/1
N2 - We use a competitive search (price-posting) framework to experimentally examine how buyer information and fairness perceptions affect market behavior. We observe that moving from zero to one uninformed buyers leads to higher prices in both 2 (seller)2 (buyer) and 2 3 markets: the former as predicted under standard preferences, the latter the opposite of the theoretical prediction. Perceptions of fair prices-elicited in the experiment-are a powerful driver of behavior. For buyers, fair prices correlate with price responsiveness, which varies systematically across treatments and impacts sellers' pricing incentives. For sellers, fair prices correlate with underpricing, which also varies systematically across treatments.
AB - We use a competitive search (price-posting) framework to experimentally examine how buyer information and fairness perceptions affect market behavior. We observe that moving from zero to one uninformed buyers leads to higher prices in both 2 (seller)2 (buyer) and 2 3 markets: the former as predicted under standard preferences, the latter the opposite of the theoretical prediction. Perceptions of fair prices-elicited in the experiment-are a powerful driver of behavior. For buyers, fair prices correlate with price responsiveness, which varies systematically across treatments and impacts sellers' pricing incentives. For sellers, fair prices correlate with underpricing, which also varies systematically across treatments.
KW - Directed search
KW - Fairness
KW - Frictions
KW - Information
KW - Posted prices
KW - Price responsiveness
UR - http://www.scopus.com/inward/record.url?scp=85045206635&partnerID=8YFLogxK
U2 - 10.1287/mnsc.2016.2620
DO - 10.1287/mnsc.2016.2620
M3 - Article
VL - 64
SP - 1101
EP - 1120
JO - Management Science
JF - Management Science
SN - 0025-1909
IS - 3
ER -