Price Competition in the Presence of a Web Aggregator

In this paper we examine the impact of a web aggregator on firms and consumers in a horizontally differentiated market. When a firm pays a fee to be listed on the aggregator’s website, its location and price become observable to e-users (consumers who visit the website). We consider two settings, depending on the possibility for online firms to offer discounts to e-users. In equilibrium, not all firms will go online – some will choose to remain offline. Online firms attract more customers due to reduced mismatch costs, but face a tougher price competition.

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