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Bargaining, Search Costs and Equilibrium Price Distributions

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Author Info
Bester, Helmut

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Abstract

This paper studies a bargaining model of equilibrium price distributions. Consumers choose a seller at random and face s earch costs to switching to another store. In the market equilibrium, the prices at all stores are determined simultaneously as the perfec t equilibrium of a bargaining game. In this game, the buyer has the o utside option to search for another seller. Differences between the s ellers' types create price dispersions; typically the number of activ e sellers increases with higher search costs. The market equilibrium converges to the competitive equilibrium under perfect information wh en search costs become small. Copyright 1988 by The Review of Economic Studies Limited.

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Article provided by Blackwell Publishing in its journal Review of Economic Studies.

Volume (Year): 55 (1988)
Issue (Month): 2 (April)
Pages: 201-14
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Handle: RePEc:bla:restud:v:55:y:1988:i:2:p:201-14

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  1. Cerqueiro, G.M. & Degryse, H.A. & Ongena, S., 2007. "Rules versus Discretion in Loan Rate Setting," Discussion Paper 2007-59, Tilburg University, Center for Economic Research. [Downloadable!]
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  2. Vesala , Timo, 2004. "Asymmetric information in credit markets and entrepreneurial risk taking," Research Discussion Papers 14/2004, Bank of Finland. [Downloadable!]
  3. Solomon W. Polachek & Jun (Jeff) Xiang, 2005. "The Effects of Incomplete Employee Wage Information: A Cross-Country Analysis," IZA Discussion Papers 1735, Institute for the Study of Labor (IZA). [Downloadable!]
  4. Anita Gantner, 2007. "Bargaining, Search, and Outside Options," Working Papers 2007-16, Faculty of Economics and Statistics, University of Innsbruck. [Downloadable!]
  5. Clara Ponsati & Jozsef Sakovics, 2004. "The provision of quality in a bilateral search market," ESE Discussion Papers 86, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
    Other versions:
  6. Michael Sattinger, 2003. "Brokers and the Equilibrium Price Function," Discussion Papers 03-11, University at Albany, SUNY, Department of Economics. [Downloadable!]
  7. Michael Sattinger, 2003. "Price Dispersion and Short Run Equilibrium in a Queuing Model," Discussion Papers 03-09, University at Albany, SUNY, Department of Economics. [Downloadable!]
  8. Gianni De Fraja & Jozsef Sakovics, 2004. "Walras Retrouve: Decentralized Trading Mechanisms and the Competitive Price," ESE Discussion Papers 36, Edinburgh School of Economics, University of Edinburgh. [Downloadable!]
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  9. Ed Hopkins & Robert M. Seymour, . "Price Dispersion: an Evolutionary Approach," ELSE working papers 043, ESRC Centre on Economics Learning and Social Evolution. [Downloadable!]
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  10. Ken Binmore, 1994. "Bargaining theory without tears," Investigaciones Economicas, Fundación SEPI, vol. 18(3), pages 403-419, September. [Downloadable!]
  11. Mitsutoshi M. Adachi, 1998. "A note on frictions in the Bazaar type bargaining game," Investigaciones Economicas, Fundación SEPI, vol. 22(2), pages 293-304, May. [Downloadable!]
  12. Clara Ponsat?Author-Email: Clara.ponsati@uab.es, 2001. "Search and bargaining in large markets with homogeneous traders," UFAE and IAE Working Papers 533.02, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC). [Downloadable!]
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