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Publications
Journal Article
International Economic Review
Subject(s)
Economics, politics and business environment; Information technology and systems
Keyword(s)
online markets, price comparison websites, price dispersion, price competition, platforms, consumer search, consumer welfare
JEL Code(s)
L11, L86, D43
The large and growing industry of price comparison websites (PCWs) or “web aggregators” is poised to benefit consumers by increasing competitive pricing pressure on firms by acquainting shoppers with more prices. However, these sites also charge firms for sales, which feeds back to raise prices. I find that introducing any number of PCWs to a market increases prices for all consumers, both those who use the sites, and those who do not. I then use my framework to identify ways in which a more competitive environment could be achieved.
ISSN (Online)
1468-2354
Keyword(s)
Price competition, price dispersion, unique equilibrium
JEL Code(s)
D43, L11
We study a canonical model of simultaneous price competition between firms that sell a homogeneous good to consumers who are characterized by the number of prices they are exogenously aware of. Our setting subsumes many employed in the literature over the last several decades. We show there is a unique equilibrium if and only if there exist some consumers who are aware of exactly two prices. The equilibrium we derive is in symmetric mixed strategies. Furthermore, when there are no consumers aware of exactly two prices, we show there is an uncountable-infinity of asymmetric equilibria in addition to the symmetric equilibrium. Our results show the paradigm generically produces a unique equilibrium. We also show that the commonly-sought symmetric equilibrium (which also nests the textbookBertrand pure strategy equilibrium as a special case) is robust to perturbations in consumer behaviour, while the asymmetric equilibria are not.
© 2020 The Editorial Board of The Journal of Industrial Economics and John Wiley & Sons Ltd
Journal Article
Journal of Economic Behavior & Organization 186 (June 2021): 318–327
David Ronayne, Daniel Sgroi, Anthony Tuckwell (2021)
Subject(s)
Economics, politics and business environment
Keyword(s)
sunk cost effect, sunk cost fallacy, endowment effect, cognitive ability, fluid intelligence, crystallized intelligence, reflective thinking, online experiment, online survey, psychological scales, scale validation, Raven’s progressive matrices, international cognitive ability resource, cognitive reflection test, openness
JEL Code(s)
D91, C83, C90
We provide experimental evidence of behavior consistent with the sunk cost effect. Subjects who earned a lottery via a real-effort task were given an opportunity to switch to a dominant lottery; yet 23% chose to stick with their dominated lottery.The endowment effect accounts for roughly only one third of the effect. Subjects’ capacity for cognitive reflection is a significant determinant of sunk cost behavior.We also find stocks of knowledge or experience (crystallized intelligence) predict sunk cost behavior, rather than algorithmic thinking (fluid intelligence) or the personality trait of openness. We construct and validate a scale, the “SCE-8”, which encompasses many resources individuals can spend, and offers researchers an efficient way to measure susceptibility to the sunk cost effect.
Volume
186
Journal Pages
318–327
Keyword(s)
Hotellin-Downs, political competition, equilibrium existence, idealism
JEL Code(s)
C72, D72
In the classic Hotelling–Downs model of political competition, no pure strategy equilibrium with three or more strategic candidates exists when the distribution of voters’ preferred policies is unimodal. I study the effect of introducing two idealist candidates to the model who are non-strategic (i.e., fixed to their policy platforms), while allowing for an unlimited number of strategic candidates. Doing so, I show that equilibrium is restored for a non-degenerate set of unimodal distributions. In addition, the equilibria have the following features: (1) the left-most and right-most candidates (i.e., extremists) are idealists; (2) strategic candidates never share their policy platforms, which instead are spread out across the policy space; and (3) if more than one strategic candidate enters, the distribution of voter preferences must be asymmetric. I also show that equilibria can accommodate idealist fringes of candidates toward the extremes of the political spectrum.
Journal Pages
389–403
ISSN (Online)
1573-7101
ISSN (Print)
0048-5829
Journal Article
Journal of Mathematical Psychology 81: 11–27
David Ronayne, Gordon D. A. Brown (2017)
Keyword(s)
Consumer choice, context effects, sampling
Consumers’ choices are typically influenced by the choice context in ways that standard models cannot explain. We provide a concise explanation of the attraction, compromise and similarity effects. The model, Multi-Attribute Decision by Sampling (MADS), posits that the evaluation of a choice option is based on its relative position in the market distribution as first inferred and then sampled by the decision-maker. The inferred market distribution is assumed to be systematically influenced by the choice options. The value of a choice option is assumed to be determined by the number of sampled comparators that the option dominates. We specify conditions on the sampling distribution that are sufficient for MADS to predict the three context effects. We tested the model using a novel experimental design with 1200 online participants. In the first experiment, prior to making a choice participants were shown a selection of market options designed to change their beliefs about the market distribution. Participants’ subsequent choices were affected as predicted. The effect was strong enough to impact the size of two of the three classic context effects significantly. In the second experiment, we elicited individuals’ estimates of distributions of market options and found the estimates to be systematically influenced by the choice set as predicted by the model. It is concluded that MADS, a model based on simple binary ordinal comparisons, is sufficient to account for the three classic context effects.
With permission of Elsevier
Volume
81
Journal Pages
11–27
Journal Article
Applied Economics Letters 25 (12): 830–834
David Ronayne, Daniel Sgroi (2017)
Subject(s)
Economics, politics and business environment
Keyword(s)
Smoking, complements, substitutes, dual-use, preferences
JEL Code(s)
I12, I18, D12
We apply a classical economic categorization of preferences to identify the motivations of dual-users of electronic and traditional cigarettes. The responses of 2,406 U.S. adults (including 413 dual-users) in 2015 were collected using a novel online survey along with a follow-up in 2016 of 143 of these adults (68 dual-users). A sizeable minority of 37% of dual-users reported viewing electronic and conventional cigarettes primarily as complements. Of those who had never smoked or used electronic cigarettes, only 27% thought the complementarity motive would be primary. Dual-user motivations were associated with quit-attempt, cessation methods, gender and age. One year on, there was a positive relationship between the level of complementarity in the dual-user’s motives and their change in self-reported consumption of traditional cigarettes. It is concluded that the application of a canonical economic classification of preferences may reveal important heterogeneities among the dual-user population.
Volume
25
Journal Pages
830–834