Sources of Limited Consideration and Market Power in E-Commerce

This article develops techniques for the empirical analysis of repeated sequential search over unordered alternatives using data on consumer search processes. I use these techniques to assess why consumers conduct little search in e-commerce and often pay significantly above the minimum available price for a product. Search costs could explain these facts, as could pre-search seller differentiation: Consumers with low search costs may not visit stores they dislike based on information known before search. I find that seller differentiation is primarily responsible for limited consideration and market power. (JEL D11, D21, D43, D83, L81)