UCL School of Management is delighted to welcome Hyunjin Kim, HBS, to host a research seminar discussing ‘The Value of Competitor Information: Evidence from a Field Experiment’

Abstract

Understanding the competitive environment is central to strategic decision-making, but examples suggest that firms may often lack knowledge of competitors. Do firms lack knowledge about their competitors’ decisions even when it is easily attainable, and how does this information impact firms’ strategic choices? I explore these questions by running a field experiment in collaboration with Yelp across 3,218 businesses in the personal care industry, where treatment firms receive easily accessible information on their competitors’ prices. At baseline, over 46% of firms are not aware of their competitors’ prices. However, once firms receive this information, they are 17% more likely to change their prices, and do so by improving their alignment with competitor offerings. The effect is larger for firms that face higher levels of competition, as well as those showing lower sophistication in pricing, suggesting that a lack of competition or capabilities to use information may not fully explain firms’ lack of knowledge. If competitor information is both decision-relevant and easily accessible, why had firms not invested in this information on their own? Evidence from interviews and a follow-up experiment across control firms suggests that managers appear to have underestimated the value of paying attention to competitor information. These findings suggest that inattention may be a key barrier that leads firms to fail to realize gains from even readily accessible data.