Ireland, Norman J. (2002) Firms' strategies for reducing the effectiveness of the consumer price search. Working Paper. University of Warwick, Department of Economics, Coventry.

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Abstract

This paper considers a simple model of competition based on some buyers making price comparisons between two suppliers. The difficulties of making appropriate comparisons are made greater by exclusive dealer agreements and restrictions, and by suppliers trading under more than one name. It is argued that suppliers will set prices using mixed strategies, and that prices become less competitive as price comparisons become more difficult. The implications for competition policy are considered in the light of recent judgements of the UK’s Office of Fair Trading and the European Court of Justice.

Item Type:	Working or Discussion Paper (Working Paper)
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HF Commerce
Divisions:	Faculty of Social Sciences > Economics
Library of Congress Subject Headings (LCSH):	Great Britain. Office of Fair Trading, Court of Justice of the European Communities, Competition, Monopolies, Consumer behavior, Profiteering
Series Name:	Warwick economic research papers
Publisher:	University of Warwick, Department of Economics
Place of Publication:	Coventry
Date:	21 January 2002
Number:	No.627
Number of Pages:	28
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access
References:	Arnold, M.A., 2000, Costly search, capacity constraints and Bertrand equilibrium price dispersion, International Economic Review, 41, 117-131. Carlton, D.W. and J. M. Perloff, 2000, Modern Industrial Organization, Addison-Wesley: New York. European Court of Justice, 2001, Judgement of the Court in joined cases C-414/99 to C-416/99, 20th November, at http://www.curia.eu.int. Gabszewicz, J.J. and Garella, P., 1986, "Subjective" price search and price competition, International Journal of Industrial Organization, 4, 305-316. Hviid, M and G Shaffer, 1999, Hassle costs: the Achilles' heel of price-matching guarantees, Journal of Economics and Management Strategy, 8, 489-521. Ireland, N.J. (1993) The provision of information in a Bertrand oligopoly, Journal of Industrial Economics, 91, 61-76. Office of Fair Trading, 2001, Dixons Stores Group Limited / Compaq Computer Limited / Packard Bell NEC Limited, CA98/3/2001, available at www.oft.gov.uk. Pratt, J.W., Wise, D.A., and Zeckhauser, R., 1979, Price differences in almost competitive markets, Quarterly Journal of Economics, 189-211. Salop, S.C. and Stiglitz, J.E., 1977, Bargains and ripoffs: a model of monopolistically competitive price dispersion, Review of Economic Studies, 44, 493-510. Varian, H., 1980, A model of sales, American Economic Review, 70, 651-659. Wilde, L.L. and Schwartz, A, 1979, Equilibrium comparison shopping, Review of Economic Studies, 543-553.
URI:	http://wrap.warwick.ac.uk/id/eprint/1563

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