Econometrica: Mar 2009, Volume 77, Issue 2
Search, Obfuscation, and Price Elasticities on the Internet
Glenn Ellison, Sara Fisher EllisonWe 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.
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