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Search and price competition

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  • Waldeck, Roger

Abstract

This paper qualifies and quantifies what is meant by higher price level and dispersion in an oligopoly market with imperfectly informed consumers for both Fixed Sample Search and Sequential Search. The objective is to identify the conditions under which prices become lower and price dispersion reduces as a function of consumers' information. Surprisingly, the mean price is an increasing function of search intensity and price dispersion is an inverse U-shaped function of the proportion of informed consumers.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 66 (2008)
Issue (Month): 2 (May)
Pages: 347-357

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Handle: RePEc:eee:jeborg:v:66:y:2008:i:2:p:347-357

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References

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  1. Janssen, Maarten C.W. & Moraga-Gonzalez, Jose Luis & Wildenbeest, Matthijs R., 2005. "Truly costly sequential search and oligopolistic pricing," International Journal of Industrial Organization, Elsevier, Elsevier, vol. 23(5-6), pages 451-466, June.
  2. Roger Waldeck & Eric Darmon, 2006. "Can boundedly rational sellers learn to play Nash?," Journal of Economic Interaction and Coordination, Springer, vol. 1(2), pages 147-169, November.
  3. Michael R. Baye & John Morgan, 2001. "Information Gatekeepers on the Internet and the Competitiveness of Homogeneous Product Markets," American Economic Review, American Economic Association, American Economic Association, vol. 91(3), pages 454-474, June.
  4. Michael Smith & Erik Brynjolfsson, 1999. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers," Computing in Economics and Finance 1999, Society for Computational Economics 1022, Society for Computational Economics.
  5. Maarten C. W. Janssen & José Luis Moraga-González, 2004. "Strategic Pricing, Consumer Search and the Number of Firms," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 71(4), pages 1089-1118, October.
  6. Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 95(5), pages 1041-61, October.
  7. George J. Stigler, 1961. "The Economics of Information," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 69, pages 213.
  8. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, Elsevier, vol. 3(2), pages 156-168, June.
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Cited by:
  1. Manfred Nermuth & Giacomo Pasini & Paolo Pin & Simon Weidenholzer, 2009. "Price Dispersion, Search Externalities, and the Digital Divide," Vienna Economics Papers, University of Vienna, Department of Economics 0916, University of Vienna, Department of Economics.
  2. Maarten C.W. Janssen & Alexei Parakhonyak, 2007. "Optimal Search with Costly Recall," Tinbergen Institute Discussion Papers 08-002/1, Tinbergen Institute.
  3. Roger Waldeck & Eric Darmon, 2006. "Can boundedly rational sellers learn to play Nash?," Journal of Economic Interaction and Coordination, Springer, vol. 1(2), pages 147-169, November.
  4. Maarten C.W. Janssen & Alexei Parakhonyak, 2011. "Consumer Search Markets with Costly Second Visits," Vienna Economics Papers, University of Vienna, Department of Economics 1102, University of Vienna, Department of Economics.
  5. Anania, Giovanni & Nisticò, Rosanna, 2014. "Price dispersion and seller heterogeneity in retail food markets," Food Policy, Elsevier, Elsevier, vol. 44(C), pages 190-201.
  6. Bernd Jost, 2012. "Price Dispersion, Search Costs and Spatial Competition: Evidence from the Austrian Retail Gasoline Market," NEURUS papers neurusp166, NEURUS - Network of European and US Regional and Urban Studies.
  7. Anania, Giovanni & Nistico, Rosanna, 2012. "Price dispersion, search costs and consumers and sellers heterogeneity in retail food markets," 2012 Conference, August 18-24, 2012, Foz do Iguacu, Brazil, International Association of Agricultural Economists 125594, International Association of Agricultural Economists.

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