Working Paper: CEPR ID: DP15448
Authors: Heski Barisaac; Sandro Shelegia
Abstract: Pricing depends on the selection of consumers and the way that they search. Diamond (1971) highlights that consumers who search for prices, paradoxically, impose no discipline on prices. Instead, searching for match information does. Showrooming disciplines prices at deep stores (where consumers can learn about many goods in a category). It also leads shallow stores, where showroomers buy, to face a larger fraction of consumers who are insensitive to price. The overall effect of more showrooming can be to raise or lower prices. It depends on the kinds of consumers who showroom. Similarly, a price-only channel can have ambiguous effects.
Keywords: consumer search; pricing; retailer variety; showrooming
JEL Codes: D83; L11; L14
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Showrooming behavior (D16) | Pricing at shallow stores (D49) |
| Consumer heterogeneity (D11) | Retail pricing equilibrium (D41) |
| Showrooming behavior (D16) | Overall retail prices (D49) |
| Less choosy consumers who showroom (D16) | Pricing dynamics (D49) |