Chen, Yongmin and Zhang, Tianle (2009): Equilibrium price dispersion with heterogeneous searchers.
Download (236kB) | Preview
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 ; Unawareness
D - Microeconomics > D4 - Market Structure, Pricing, and Design > 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|
Armstrong, Mark and Yongmin Chen. 2009. "Inattentive Consumers and Product Quality." Journal of the European Economic Association, 7, 411-422.
Baye, Michael and John Morgan. 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets." American Economic Review, 91, 454-474.
Baye, M.R. and J. Morgan. 2004. "Price Dispersion in the Lab and on the Internet: Theory and Evidence." Rand Journal of Economics, 35(3), 449-466.
Baye, Michael, John Morgan, and Patrick Scholten. 2006. "Information, Search, and Price Dispersion," in T. Hendershott (ed.) Handbook of Economics and Information Systems, Elsevier Press, Amsterdam.
Burdett, Kenneth and Kenneth L. Judd. 1983. "Equilibrium Price Dispersion." Econometrica, 51, 955-969.
Diamond, Peter. 1971. "A Model of Price Adjustment." Journal of Economic Theory, 3,156-168.
Ellison, Glenn. 2005. "A Model of Add-on Pricing." Quarterly Journal of Economics, 120, 585-637.
Ellison, Glenn. 2006. "Bounded Rationality in Industrial Organization," in Richard Blundell, Whitney Newey, and Torsten Persson (eds.) Advances in Economics and Econometrics: Theory and Applications, Ninth World Congress, Cambridge University Press, Cambridge.
Ellison, Glenn and Sara Fisher Ellison. 2005. "Lessons About Markets from the Internet." Journal of Economic Perspectives, 19, 139-158.
Ellison, Glenn and Sara Fisher Ellison. 2008. "Search, Obfuscation, and Price Elasticities on the Internet." Econometrica, forthcoming.
Gabaix, Xavier and David Laibson. 2006. "Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets." Quarterly Journal of Economics, 121, 505-540.
Janssen, Maarten C. and Jose Luis Moraga-Gonzalez. 2004. "Strategic Pricing, Consumer Search and the Number of Firms." Review of Economics Studies, 71, 1089-1118.
Reinganum, Jennifer F. 1979. "A simple Model of Equilibrium Price Distribution." Journal of Political Economy, 87, 851-858.
Rosenthal, Robert W. 1980. "A Model in which an Increase in the Number of Sellers Leads to a Higher Price." Econometrica, 48, 1575-1579.
Spiegler, Ran. 2006. "The Market for Quacks." Review of Economics Studies, 73, 1113-1131.
Stahl, Dale O. 1989. "Oligopolistic Pricing with Sequential Consumer Search." American Economic Review, 79, 700-712.
Stahl, Dale O. 1996. "Oligopolistic Pricing with Heterogeneous Consumer Search." International Journal of Industrial Organization, 14, 243-268.
Varian, Hal. 1980. "A Model of Sales."American Economic Review, 70, 651-659.
Available Versions of this Item
- Equilibrium price dispersion with heterogeneous searchers. (deposited 29. Jul 2009 23:45) [Currently Displayed]