Document Type
Article
Publication Date
1-1-2018
Published In
Economics Letters
Abstract
We demonstrate that regulations that lower consumer search costs and make them less heterogeneous across consumers can lead to higher prices charged by firms. We estimate the distribution of consumer search costs for 366 isolated retail gasoline markets, and find that reducing the mean and standard deviation by 20% and 48%, respectively, leads to price increases in 32% of markets and an average price increase of 5.2 cents per gallon across all markets. Thus, price transparency regulation that results in higher prices may not stem from collusion, but from an equilibrium with less consumer search.
Keywords
Search costs, Consumer search, Retail gasoline
Recommended Citation
M. Nishida and Marc Remer.
(2018).
"Lowering Consumer Search Costs Can Lead To Higher Prices".
Economics Letters.
Volume 162,
DOI: 10.1016/j.econlet.2017.10.011
https://works.swarthmore.edu/fac-economics/439
Comments
This work is a postprint that is freely available courtesy of Elsevier.