Please use this identifier to cite or link to this item: http://hdl.handle.net/10397/30263
Title: Equilibrium price dispersion with heterogeneous searchers
Authors: Chen, Y
Zhang, T
Keywords: Bounded rationality
Price dispersion
Search
Search cost
Issue Date: 2011
Publisher: Elsevier Science Bv
Source: International journal of industrial organization, 2011, v. 29, no. 6, p. 645-654 How to cite?
Journal: International Journal of Industrial Organization 
Abstract: 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, 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 (exogenous) reservation price of local searchers depart from that of the optimizing sequential searchers by a relatively small amount, 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.
URI: http://hdl.handle.net/10397/30263
DOI: 10.1016/j.ijindorg.2011.03.007
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