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Competition in Online Markets: When Banks Compete, Do Consumers Really Win?

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  • Abdullah Al-Bahrani

Abstract

The perceived objective of price comparison sites is to aggregate price quotes from several firms. They are expected to reduce consumers' search costs and lead to more competitive markets. In this paper, I examine the difference in the prices consumers pay on comparison sites relative to traditional shopping methods. Using a unique data set, a mortgage firm's pricing strategies on Lendingtree.com, a price comparison site, and in traditional markets are examined. The results indicate that lendingtree.com and traditional consumers pay the same price on average. The presumed benefits from lower search cost on lendingtree.com do not result in lower mortgage prices.

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  • Abdullah Al-Bahrani, 2016. "Competition in Online Markets: When Banks Compete, Do Consumers Really Win?," Journal of Housing Research, Taylor & Francis Journals, vol. 25(2), pages 157-170, January.
    • Handle: RePEc:taf:rjrhxx:v:25:y:2016:i:2:p:157-170
    DOI: 10.1080/10835547.2016.12092117
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