Abstract
Limited or costly information generates excess price dispersion across markets causing market inefficiency. In this setting, smartphones, as information-providing devices, can improve market performance. This paper explores the Korean retail gasoline market as a natural experimental field to investigate the impact of smartphones on competition among gas stations. In this particular market, smartphones have provided consumers with direct access to gasoline price information from the pre-existing information channel called OPINET, a government-sponsored Internet website. Our results are consistent with the relevant theory: the adoption of smartphones is associated with dramatic decreases in both price dispersion and average price-cost margins, thereby creating huge consumer gains. In addition, we found a sudden drop in entries along with a slow rise in exits after the introduction of the smartphones.
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