Heterogeneous Price Technologies

Abstract

We present a unified theory of dynamic oligopoly pricing with heterogeneous information technologies on each side of the market. Trackers (on the firm-side) and shoppers (on the consumer-side) can follow market prices costlessly, whereas non-trackers and non-shoppers cannot. We describe both non-collusive and collusive equilibria. While the effects of tracking may be non-monotone, the presence of trackers generally harms consumers. The price pattern that arises with trackers and non-trackers reconciles a multitude of cross-sectional price patterns, such as persistent price differences and adherence to or avoidance of certain prices. We find that non-trackers can counter tracker collusion by applying a limit-price strategy.