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Multiplicity of equilibria in search markets with free entry and exit

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  • Pereira, Pedro

Abstract

In this paper I identify an instance of multiplicity of equilibria, in search markets with production cost heterogeneity. I show that if firms may enter or exit the market, there may be multiple equilibria. I provide a monotonicity property, which is necessary and sufficient for uniqueness. Multiplicity vanishes as the search cost gets small. Multiple equilibria can be ranked by welfare.

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Bibliographic Info

Article provided by Elsevier in its journal International Journal of Industrial Organization.

Volume (Year): 23 (2005)
Issue (Month): 5-6 (June)
Pages: 325-339

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Handle: RePEc:eee:indorg:v:23:y:2005:i:5-6:p:325-339

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Web page: http://www.elsevier.com/locate/inca/505551

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  1. Benabou, Roland, 1988. "Search market equilibrium bilateral heterogeneity and repeat purchases," CEPREMAP Working Papers (Couverture Orange) 8806, CEPREMAP.
  2. David Kreps & Robert Wilson, 1998. "Sequential Equilibria," Levine's Working Paper Archive 237, David K. Levine.
  3. Jennifer F. Reinganum, 1978. "A Simple Model of Equilibrium Price Dispersion," Discussion Papers 335, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  4. Kyle Bagwell & Garey Ramey, 1990. "Advertising and Coordination," Discussion Papers 903, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
  5. MacMinn, Richard D, 1980. "Search and Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 308-27, April.
  6. Pereira, Pedro, 2001. "Market power, cost reduction and consumer search," International Journal of Industrial Organization, Elsevier, vol. 19(9), pages 1457-1473, November.
  7. Morgan, Peter & Manning, Richard, 1985. "Optimal Search," Econometrica, Econometric Society, vol. 53(4), pages 923-44, July.
  8. Michael Rothschild, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown: A Summary," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 3, number 1, pages 293-294 National Bureau of Economic Research, Inc.
  9. Rothschild, Michael, 1974. "Searching for the Lowest Price When the Distribution of Prices Is Unknown," Journal of Political Economy, University of Chicago Press, vol. 82(4), pages 689-711, July/Aug..
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