Price Dispersion, Price Flexibility, and Repeated Purchasing
AbstractThis paper presents a search model in which consumers repeatedly purchase some good. The repetition of purchases leads to the formatio n of implicit contracts with sellers that generate a kink in the demand curve facing each seller. These kinks can generate equilibrium price dispersion under conditions where single-purchase search models predict no price dispersion. Despite the kinks, prices are at least partially flexible in that some, and possibly all, sellers change their prices in response to changes in production costs or demand.
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Bibliographic InfoArticle provided by Canadian Economics Association in its journal Canadian Journal of Economics.
Volume (Year): 21 (1988)
Issue (Month): 4 (November)
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Postal: Canadian Economics Association Prof. Steven Ambler, Secretary-Treasurer c/o Olivier Lebert, CEA/CJE/CPP Office C.P. 35006, 1221 Fleury Est Montréal, Québec, Canada H2C 3K4
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