M Baye

Michael Baye is the Bert Elwert Professor of Business at Indiana University’s Kelley School of Business, a position he has held since 1997. From July 2007 to December 2008, he also served as Director of the Bureau of Economics at the US Federal Trade Commission (FTC). In his role as chief economist of the FTC, he advised the Commission on antitrust, consumer protection, and economic policy matters.

Baye’s research focuses on pricing strategies and their impact on consumer welfare and firm profits in both online and traditional markets. His academic work on mergers, auctions, patents, advertising, online markets, and other areas related to antitrust and consumer protection has been published in leading economics and marketing journals. Additionally, his academic research on pricing strategies in online markets has been featured in the Wall Street Journal, Forbes, and The New York Times.

Baye has won numerous awards for outstanding teaching and research and has published several textbooks. He  has lectured and spoken at conferences and academic institutions throughout North America and Europe, and has held visiting appointments at Cambridge, Oxford, Erasmus University, Tilburg University, and the New Economic School in Moscow.

Baye holds a BS in economics from Texas A&M University and a PhD in economics from Purdue University.

Excerpt from Who’s Who in Economics

According to the 4th edition of Who's Who in Economics, Michael Baye's research primarily focuses on pricing strategies and their impact on consumer welfare and firm profits. His early papers showed how to properly construct indices of prices when different firms charge different prices for the same product and consumers have imperfect price information.

In subsequent research, these results were extended to retail environments where consumers optimally search for lower prices. His related research showed that, by appropriately modifying price indices, cost-of-living measures and real wage indices to account for a progressive income tax, one could quantify the impact of “bracket creep” on consumer welfare.

This research contributed to the policy debate of the 1980s by documenting the “cost” of various proposals to delay or repeal the indexation of the US federal income tax code.

Selected Media Coverage

Slate: Gadgets for Sale … or Not, December 22, 2006

Last week, USA Today reported that online sales in November increased 25 percent over those from 2005. If you've shopped for gadgets online this holiday season, you almost certainly found that the camcorder or DVD player you wanted was selling at a wide range of prices. Why is there so much price variation for the same product?...

Wall Street Journal: The Next Generation of Price Comparison Sites, September 14, 2005

The big attraction with shopping-comparison services, of course, is the hunt for a better bargain. Consumers save 18% to 20% on average by using comparison-shopping sites to buy products on the Web, according to research by Michael Baye, an Indiana University professor; John Morgan, a University of California at Berkeley professor; and Patrick Scholten, a Bentley College professor

New York Times, Chicago Tribune: Price-Comparison Sites Do the Legwork, February 3, 2005

Along with two colleagues - Professor John Morgan of the University of California at Berkeley and Patrick Scholten, an assistant professor of economics at Bentley College in Massachusetts - Professor Michael Baye has published up-to-the-minute statistics on retail pricing strategies.

Network World: E-commerce: Net-Style Nash Equilibrium, February 14, 2005

Five years ago, the first price-comparison Web sites were being hailed as heaven on earth for penny pinchers and the fast track to Hell for online merchants who failed to establish and protect a unique reason for being. That early assessment turns out to have been not so hot...

ZDNet News, CNet Online Retailers Play Pricing Games. February 8, 2005

Think you've found the lowest price online? Better double check. That's the advice of economists who research why a plethora of online price comparison systems haven't succeeded in leveling prices on the Internet. "A lot of early studies predicted that all firms would be forced to price their goods at cost and prices would be driven down... Getting The Price Right. November 9, 2004

When electronic commerce was new some retailers feared that consumers would know too much. With ever more powerful and smart search technologies cropping up online offering new ways to compare prices, wouldn't price-sensitive consumers automatically gravitate toward retailers with the lowest prices and thus unleash a fierce attack on profit margins? It hasn't quite happened that way...

Marketing Power: The Value of Online Price Information.

In 2000, U.S. Internet retail sales reached a staggering $29 billion, an increase of more than 92% over 1999 sales. Institutions largely unknown to traditional retail markets have emerged on the Internet: price comparison services. These Internet institutions provide centralized locations for retailers to advertise products and for consumers to comparison shop for physically identical products. The popularity of Internet price comparison services has...

New York Times: Online Sales Offer Fresh Look at Economy. December 19, 2002

According to Census Bureau estimates, online purchases in the United States totaled more than $11 billion in the third quarter this year, up 34 percent over the period in 2001. Despite this impressive growth, online sales are still tiny compared with total retail sales, which were $827 billion in the third quarter. Though online sales are not yet important economically, they are important to economists because they offer a rich source of economic data. It is much easier to collect online prices than offline prices, and with a little bit of ingenuity, you can even harvest data about costs and sales volume, information that is awfully hard to come by in the real world. Economists Michael R. Baye, Patrick Scholten, and John Morgan...