Consumer search and double marginalization
- Author(s)
- Maarten Janssen, Sandro Shelegia
- Abstract
The well-known double marginalization problem understates the inefficiencies arising from vertical relations in consumer search markets where consumers are uninformed about the wholesale prices charged by manufacturers to retailers. Consumer search provides a monopoly manufacturer with an additional incentive to increase its price, worsening the double marginalization problem and lowering the manufacturer's profits. Nevertheless, manufacturers in more competitive wholesale markets may not have an incentive to reveal their prices to consumers. We show that retail prices decrease in search cost, and so both industry profits and consumer surplus increase in search cost. (JEL D11, D42, D83, L12, L25, L60, L81).
- Organisation(s)
- Department of Economics
- Journal
- The American Economic Review (Print Edition)
- Volume
- 105
- Pages
- 1683-1710
- No. of pages
- 28
- ISSN
- 0002-8282
- DOI
- https://doi.org/10.1257/aer.20121317
- Publication date
- 05-2015
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502047 Economic theory
- ASJC Scopus subject areas
- Economics and Econometrics
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/consumer-search-and-double-marginalization(a01b2580-b46d-4ed6-af25-4d8b998b5b30).html