Markets with Price Coherence

by Benjamin Edelman & Julian Wright
 
 

Overview — In markets with price coherence, buying something through an intermediary is constrained to occur at the same price as buying that same good directly from the seller (or through a competing intermediary). Price coherence has downsides such as inflated retail prices and excessive adoption of intermediaries' services. In this paper the authors discuss 13 affected markets including travel and hotel booking networks and real estate buyers' agents. The authors explain how each market began operation, how the intermediary established price coherence, and possible policy interventions. (This working paper complements the authors' Price Coherence and Excessive Intermediation, which provides a formal model for affected markets and the distortions that occur in these markets.)

Author Abstract

In markets with price coherence, the purchase of a given good via an intermediary is constrained to occur at the same price as a purchase of that same good directly from the seller (or through another competing intermediary). We examine thirteen markets with price coherence, including their origin and outcomes as well as concerns and policy interventions.

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