Three essays analyzing Internet markets

The dissertation consists of three essays in the field of applied industrial organization, nevertheless two of them have important implications for macro-economics. The integrating theme of the three essays is the Internet.;Late bidding, i.e. executing bids in the last seconds or minutes of an auctions, is a common strategy in Internet auctions with fixed end time. Roth and Ockenfels (2002) offer three explanations of this practice. The first chapter of the dissertation proposes tests of the respective hypotheses using a unique data set compiled for this purpose.;Chapter two analyzes the degree of price rigidity in the e-commerce. We find that the degree of price stickiness on the Internet is not higher in the four European countries under study than in the US. This contrasts with the stylized fact of substantially higher price rigidity in the traditional retail sector in the EU countries as compared to the US and serves as an indirect evidence of the importance of the more intrusive regulatory framework in the off-line price-setting mechanism in Europe in explaining the macroeconomic persistence.;Chapters two and three together test the predictions of the menu cost hypothesis on the Internet by comparing the degree of price rigidity in the e-commerce and off-line. Since the menu costs in the narrow sense are virtually absent on the Internet, the hypothesis predicts that (1) online sellers will change their prices more often than traditional retailers, (2) they will execute very small price changes, and (3) the timing of price changes of different products offered by a particular seller will be less synchronized on the Internet. Altogether, the evidence concerning the menu cost hypothesis is rather mixed.;Lastly, chapter three implements three tests of within-store synchronization of price changes over time. All the tests indicate considerable degree of within-store price synchronization which contradicts the menu cost hypothesis. On the other hand, the results do not contradict the prediction of the decision cost hypothesis, which suggests that decision costs might play more important role in explaining price stickiness than it is usually assumed.