Journal Articles

Clicks, Discontinuities, and Firm Demand Online

2009, Journal of Economics & Management Strategy

Michael R. Baye, Rupert Gatti, Paul Kattuman, John Morgan

Abstract

We exploit a unique dataset from a price comparison site 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, and failure to account for discontinuities distorts parameter estimates by nearly 100%. This discontinuity is consistent with a variety of models that have been used to rationalize online price dispersion. Finally, we show that one may use estimates of the determinants of a firm's clicks to obtain bounds on its underlying demand parameters, including standard elasticities of demand.

Citation

Michael R. Baye,  J. Rupert Gatti, Paul Kattuman, and John Morgan, "Clicks, Discontinuities, and Firm Demand Online," Journal of Economics & Management Strategy, Vol. 18, No. 4 (Winter 2009), pp. 935-975.