Equilibrium Price Dispersion with Sequential Search

Diamond (1971) showed that in a market where consumers search sequentially and have strictly positive search costs the unique price equilibrium is where all firms charge the monopoly price. This paper demonstrates that Diamond's result depends crucially on the assumption of single commodity search and does not persist when the model is generalised to allow multi-commodity search. A model is presented where identical consumers search optimally (sequentially) and with positive search costs for two commodities. Firms supply only one of the commodity types so consumers are required to sample at least two firms to satisfy their consumption requirements. Within industries firms are identical, producing a homogenous product at the same, constant, marginal cost. The equilibrium is shown to display price dispersion, in fact no two firms charge the same price with positive probability. Comparative statics are conducted and it is demonstrated that the price dispersion depends solely on the search behaviour of consumers, converging to the competitive price as search costs converge to zero. Changes in industry demand effect equilibrium prices only through the indirect impact the change in demand has on the consumers search behaviour.

Business Models and Market Structure within the Scholarly Communications Sector

The scholarly communications sector is undergoing a period of profound transformation. The emergence of digital publishing technologies, wide-spread demands for open access to research outputs, calls for more rapid dissemination of research findings and underlying data - especially in emergencies such as global pandemics, and the expansion of publishers operations into all aspects of the research cycle are requiring and inspiring innovative new process and practices. At the same time there is growing awareness and concern in scientific and scholarly communities about the business models and operating practices being adopted by publishers, particularly commercial publishers. The International Science Council Discussion Paper “Opening the Record of Science” (Boulton et al. (2020)) highlights many of these concerns and identifies some fundamental principles for scholarship and scholarly communications to frame developments in the sector. This paper is designed to complement that paper, and similar discussions, by assessing the economic implications of current business models for scientific publishing, evaluating their advantages and disadvantages in relation to the fundamental principles advocated, and proposing a range of models that would be compatible with those principles.2 The paper proceeds by first positioning the situation within the broader setting of how to effectively regulate digital markets. The dominant business model and industrial structure within scholarly communications at the end of the last century is then discussed, as a springboard from which to consider new business models that have arisen over the past twenty years and their likely implications for the sector. The paper concludes that there would be considerable benefit to the establishment of a permanent digital markets unit to monitor and assess ongoing developments in the scholarly communications sector and to coordinate and encourage “good behaviour” across all actors in the sector

Online Price Dispersion Within and Between Seven European Countries

This paper provides a comprehensive analysis of online price dispersion in Europe, across a broad range of product categories and countries. Using the dominant European price comparison site we collected firm specific prices, weekly, from sevcn European countries (Denmark, France, Italy, Netherlands, Spain, Sweden and the United Kingdom) for 31 unique products, falling into five distinct product categories (printers, PDAs, scanners, games consoles, computer games and music), over the nine month period October 2001 to June 2002. The resulting data set comprises over 17,000 individual price observations. Using a number of alternative measures of price dispersion we find significant differences in the degree of price dispersion observed in online markets, both between countries and across product categories. We consider alternative explanations for online price dispersion and analyse their significance in explaining the observed differences

A Note on the Existence of Nash Equilibrium in Games with Discontinuous Payoffs

This paper generalises the approach taken by Dasgupta & Maskin (1986) and Simon (1989) and provides necessary and sufficient conditions for the existence of pure and mixed strategy Nash equilibrium in games with continuous strategy spaces and discontinuous payoff functions. The conditions can be applied widely, and examples for existence of pure strategy and monotonic equilibria in First-Price auctions are provided. The conditions are also appropriate for ensuring that computer generated equilibrium solutions can be extended to continuous strategy spaces

Bibliodiversity in Practice: Developing Community-Owned, Open Infrastructures to Unleash Open Access Publishing

International audienceAcademic publishing is changing. The drive towards open access publishing, which is being powered in the UK by funding bodies (SHERPA Juliet), the requirements of REFs 2021 (UKRI) and 2027 (Hill 2018), and Europe-wide movements such as the recently-announced Plan S (‘About Plan S’), has the potential to shake up established ways of publishing academic research. Within book publishing, the traditional print formats and the conventional ways of disseminating research, which are protected and promoted by a small number of powerful incumbents, are being challenged. Academic publishing, and academic book publishing, is at a crossroads: will it find ways to accommodate open access distribution within its existing structures? Or will new systems of research dissemination be developed? And what might those new systems look like?In this article we look at the main features of the existing monograph publication and distribution ecosystem, and question the suitability of this for open access monographs. We look specifically at some of the key economic characteristics of the monograph publishing market and consider their implications for new infrastructures designed specifically to support open access titles. The key observations are that the production of monographs displays constant returns to scale, and so can (and does) support large numbers of publishing initiatives; at the same time the distribution and discovery systems for monographs display increasing returns to scale and so naturally leads to the emergence of a few large providers. We argue that in order to protect the diversity of players and outputs within the monograph publishing industry in the transition to open access it is important to create open and community-managed infrastructures and revenue flows that both cater for different business models and production workflows and are resistant to take over or control by a single (or small number) of players

Business Models and Market Structure within the Scholarly Communications Sector

The scholarly communications sector is undergoing a period of profound transformation. The emergence of digital publishing technologies, wide-spread demands for open access to research outputs, calls for more rapid dissemination of research findings and underlying data - especially in emergencies such as global pandemics, and the expansion of publishers operations into all aspects of the research cycle are requiring and inspiring innovative new process and practices. At the same time there is growing awareness and concern in scientific and scholarly communities about the business models and operating practices being adopted by publishers, particularly commercial publishers. The International Science Council Discussion Paper “Opening the Record of Science” (Boulton et al. (2020)) highlights many of these concerns and identifies some fundamental principles for scholarship and scholarly communications to frame developments in the sector. This paper is designed to complement that paper, and similar discussions, by assessing the economic implications of current business models for scientific publishing, evaluating their advantages and disadvantages in relation to the fundamental principles advocated, and proposing a range of models that would be compatible with those principles. The paper proceeds by first positioning the situation within the broader setting of how to effectively regulate digital markets. The dominant business model and industrial structure within scholarly communications at the end of the last century is then discussed, as a springboard from which to consider new business models that have arisen over the past twenty years and their likely implications for the sector. The paper concludes that there would be considerable benefit to the establishment of a permanent digital markets unit to monitor and assess ongoing developments in the scholarly communications sector and to coordinate and encourage “good behaviour” across all actors in the sector

Did the Euro Foster Online Price Competition? Evidence from an International Price Comparison Site

We study the impact of the Euro on prices charged by online retailers within the EU. Our data spans the period before and after the Euro was introduced, covers a variety of products, and includes countries inside and outside of the Eurozone. After controlling for cost, demand, and market structure effects, we show that the pure Euro changeover effect is to raise average prices in the Eurozone by 3% and average minimum prices by 7%. Finally, we develop a model of online pricing in the context of currency unions, and show that these price patterns are broadly consistent with clearinghouse models.Price competition, internet

Estimating Firm-Level Demand at a Price Comparison Site: Accounting for Shoppers and the Number of Competitors

Clearinghouse models of online pricing---such as Varian (1980), Rosenthal (1980), Narasimhan (1988), and Baye-Morgan (2001)---view a price comparison site as an 'information clearinghouse' where shoppers and loyals obtain price and product information to make online purchases. These models predict that the responsiveness of a firm's demand to a change in its price depends on the number of sellers and whether the price change results in the firm charging the lowest price in the market. Using a unique firm-level dataset from Kelkoo.com (Yahoo!'s European price comparison site), we examine these predictions by providing estimates of the demand for PDAs. Our results indicate that the number of competing sellers and both the firm's location on the screen and relative ranking in the list of prices are important determinants of an online retailer's demand. We find that an online monopolist faces an elasticity of demand of about -2, while sellers competing against 10 other sellers face an elasticity of about -6. We also find empirical evidence of a discontinuous jump in a firm's demand as its price declines from the second-lowest to the lowest price. Our estimates suggest that about 13% of the consumers at Kelkoo are 'shoppers' who purchase from the seller offering the lowest price.Internet, Price Dispersion, Advertising

Clicks, Discontinuities, and Firm Demand Online

The market values of online platforms, such as Yahoo, stem from their ability to monetize the clicks they generate for firms advertising on their sites. We exploit a unique dataset on clicks from one of Yahoo's price comparison sites to estimate the determinants of clicks received by online retailers. We find that a firm enjoys a 60% jump in its clicks when it offers the lowest price at the site. This discontinuity is consistent with a variety of models that have been used to rationalize the price dispersion observed in online markets. We also show that one may use estimates of the determinants of a firm's clicks to obtain bounds on its underlying demand parameters, including own- and cross-price elasticities. Our results have potentially significant ramifications for online retailers, platforms, and policymakers: Failure to account for discontinuities distorts parameter estimates by 50 to 100 percent.