Price comparison websites: are they really that simple, or could we be paying more?

A study by the Department’s David Ronayne suggests that we could be paying more, whether we use a price comparison website or not and that the existence of price comparison websites may actually be bad for consumers.

In his paper “Price Comparison Websites”, David argues that they may push prices up not down, and that increasing the number of competing comparison sites may intensify the problem. The working paper suggests that before service providers had an online presence, the benefit a comparison service could bring was more obvious but now, firms have their own websites where you can find their prices in a few clicks.

David said:

The common belief is that these sites benefit consumers by increasing competition between service providers. But these websites are not charities; they charge fees to firms, which in turn have to be passed on to consumers through increased prices.

Of course, given that these sites exist, we as consumers are of course better off by using them to navigate to the cheapest deal on the market. What I am asking in my research is under what conditions it is true that consumers would actually prefer them not to exist at all.

His analysis highlighted two crucial factors; firstly how many comparison sites there are and secondly how many of them consumers are checking.

He explained:

I found that only in the unlikely case where people who use these sites check every single one of them, is it guaranteed that they will benefit from the existence of the industry. It all begs the question – who actually benefits from price comparison websites apart from the websites themselves? And the answer, I am afraid, just is not clear.

These sites have received a lot of attention from regulators already and although more analysis needs to be done, the results of my initial research suggest more serious and involved regulatory action may be necessary in order to ensure consumers really do benefit from this industry.

To read the full article and for details on how to contact David Ronayne, please view the main University website news article.