Chen, Yongmin and Zhang, Tianle (2009): Equilibrium price dispersion with heterogeneous searchers.
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Firms simultaneously set prices in a homogeneous-product market where uninformed consumers search for price information. Some uninformed consumers are local searchers who visit only one seller, possibly due to high search costs or bounded rationality; whereas others search sequentially with an optimal reservation price. Equilibrium prices may follow a mixture distribution, with clusters of high and low prices separated by a zero-density gap. The presence of local searchers raises prices for high-value products but can lower prices for low-value products. A reduction in search cost sometimes leads to higher equilibrium prices.
|Item Type:||MPRA Paper|
|Original Title:||Equilibrium price dispersion with heterogeneous searchers|
|Keywords:||price dispersion; search; search cost; bounded rationality|
|Subjects:||D - Microeconomics > D8 - Information, Knowledge, and Uncertainty > D83 - Search; Learning; Information and Knowledge; Communication; Belief
D - Microeconomics > D4 - Market Structure and Pricing > D43 - Oligopoly and Other Forms of Market Imperfection
|Depositing User:||Tianle Zhang|
|Date Deposited:||29. Jul 2009 23:45|
|Last Modified:||18. Feb 2013 22:23|
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