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Attribute Search in Online Retail Grocery Markets

Author

Listed:
  • Timothy Richards

    (Arizona State University)

  • Stephen Hamilton

    (Department of Economics, California Polytechnic State University)

Abstract

Online shopping is common in many categories of retail goods. The recent trend towards online retailing has created an unprecedented empirical opportunity to examine consumer search behavior using click stream data. In this paper we examine consumer search intensity across a wide range of grocery products that differ in the depth of product assortment. We develop a model of attribute search in which consumers search within a chosen retailer for products that match their tastes, and that equilibrium prices reflect retailers’ expectations of how intensively consumers intend to shop. The model predicts an inverse relationship between product variety and attribute search in which greater product variety reduces search intensity and leads to higher retail prices. We test these hypotheses using consumer data on online search and purchase behavior from the comScore Web Behavior Panel. Our results indicate that consumer’s search less and pay higher retail prices in categories with deeper product assortments, a finding that suggests deeper product assortments can produce anti-competitive effects in retail food markets mediated through equilibrium responses in consumer search.

Suggested Citation

  • Timothy Richards & Stephen Hamilton, 2015. "Attribute Search in Online Retail Grocery Markets," Working Papers 1505, California Polytechnic State University, Department of Economics.
    • Handle: RePEc:cpl:wpaper:1505
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    References listed on IDEAS

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    Cited by:

    1. Richards, Timothy J. & Hamilton, Stephen F. & Allender, William, 2016. "Search and price dispersion in online grocery markets," International Journal of Industrial Organization, Elsevier, vol. 47(C), pages 255-281.

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    More about this item

    Keywords

    consumer search; variety; retail prices; attribute search; market power.;
    All these keywords.

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

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