Pricing in Competitive Search Markets: The Roles of Price Information and Fairness Perceptions

Anbarci, N.; Feltovich, N.

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.

Citation

Anbarci, N., & Feltovich, N. (2017). Pricing in Competitive Search Markets: The Roles of Price Information and Fairness Perceptions. Management Science, 64(3), 1101-1120. https://doi.org/10.1287/mnsc.2016.2620

• Journal Article Type: Article
• Acceptance Date: Jul 17, 2016
• Online Publication Date: Jan 10, 2017
• Publication Date: Mar 31, 2017
• Deposit Date: Aug 16, 2018
• Publicly Available Date: Aug 30, 2018
• Journal: Management Science
• Print ISSN: 0025-1909
• Electronic ISSN: 1526-5501
• Publisher: Institute for Operations Research and Management Sciences
• Peer Reviewed: Peer Reviewed
• Volume: 64
• Issue: 3
• Pages: 1101-1120
• DOI: https://doi.org/10.1287/mnsc.2016.2620
• Public URL: https://durham-repository.worktribe.com/output/1323117