| This dissertation studies, theoretically and empirically, the price dispersion and price adjustment behavior of the retailers in duopoly/oligopoly market with homogeneous product. The first chapter models the equilibrium behavior of firms and an information gatekeeper in a duopoly market where firms have asymmetric numbers of loyal consumers and compete with costly advertising to reach consumers. The main finding is that, in equilibrium, the firm with more loyal consumers advertises less and prices more aggressively. The second chapter examines an n-firm model of oligopoly pricing with heterogeneous marginal costs, costly price adjustments, and temporal cost shocks. The equilibrium of the model exhibits spatial price dispersion, temporal price dispersion and price rigidity. A method is then proposed to structurally estimate the model via a maximum likelihood estimation approach that requires only pricing data. Monte-Carlo results reveal that the proposed approach yields accurate and efficient estimates for multiple combinations of model parameters. The third chapter empirically examines firms' price adjustment behavior in online market by exploiting a dataset of digital camera prices obtained from Pricegrabber.com. Descriptive analysis and reduced form regression on the data provide evidences that support the price adjustment cost theory for price rigidity. The chapter then structurally estimates price adjustment cost. Results of the estimation indicate that price adjustment cost in online digital camera market, as a percentage of the retailer's profit, is lower than that in traditional markets. |
