Bias and Size Effects of Price-Comparison Platforms: Theory and Experimental Evidence

Abstract

Abstract We analyze the impact on consumer prices of some information characteristics of price-comparison search platforms. An equilibrium model where vendors compete in prices and consumers do not observe prices, but can obtain price information through a search platform, is developed. The model generates several predictions about the impact on the price distribution of: (i) the size of the search platform’s sample, (ii) whether the search platform’s sample is random, and (iii) the number of vendors in the market. The model’s predictions are tested experimentally. The results confirm the predictions about (ii) and (iii), but reject the model’s predictions about (i).