Abstract
The increased transparency of online markets enables highly detailed insights into competitive processes between firms that were previously hard to observe. One of the most fundamental issues in such competitive processes is the reaction of a firm to an action of its competitor(s). In this paper we develop a model outlining the conditions for competitive reactions, using detailed data from a price-comparison in the online market for laptops. The analysis reveals that the probability for a reaction rises by a firm’s distance to its preferred position (rank and placement), by a lower price rank as well as if the firm reacted to the same sellers in the past, although the precise timing of the reaction is much more difficult to determine. Furthermore, when companies react, they react stronger if they are further away from their preferred position (rank and placement) and if they face a disadvantage on non-price dimensions.
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