Katja Seim, Yale University; Maria Ana Vitorino, INSEAD; and David Muir, University of Delaware
Quantitative Marketing and Economics, Volume 15, Issue 4, December 2017
Abstract: We examine the role of price transparency in consumer preferences and demand. We assemble a detailed dataset on the driving school industry in Portugal to quantify how firms present the price of the course of instruction, and its individual components, to potential students. Our unique data allows us to estimate a structural model of school choice and measure the impact of varying levels of price information on demand. The results show that consumers are willing to pay a significant amount for price transparency, on average 11% of the service price, and that consumer demographics drive heterogeneous preferences for transparency.