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. When the departure of their (exogeneous) reservation price from that of the (optimizing) global searchers is relatively small, the presence of local searchers either has no effect on market outcomes or benefits all consumers. 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:||20. Nov 2009 05:36|
|Last Modified:||14. Feb 2013 09:54|
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Equilibrium price dispersion with heterogeneous searchers. (deposited 29. Jul 2009 23:45)
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