The Stability of Price Dispersion under Seller and Consumer Learning
AbstractIn many markets, it is possible to find rival sellers charging different prices for the same good. Earlier research has attempted to explain this phenomenon by demonstrating the existence of dispersed price equilibria when consumers must make use of costly search to discover prices. We ask whether such equilibria can be learned when sellers adjust prices adaptively in response to current market conditions. With consumer behavior fixed, convergence to a dispersed price equilibrium is possible in some cases. However, once consumer learning is introduced, the monopoly outcome first found by Diamond ("Journal of Economic Theory"3 (1971), 156-68) is the only stable equilibrium. Copyright 2002 by the Economics Department of the University of Pennsylvania and Osaka University Institute of Social and Economic Research Association
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Bibliographic InfoArticle provided by Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association in its journal International Economic Review.
Volume (Year): 43 (2002)
Issue (Month): 4 (November)
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Other versions of this item:
- Ed Hopkins & Roberty M. Seymour, 2002. "The Stability of Price Dispersion under Seller and Consumer Learning," Game Theory and Information 0203002, EconWPA.
- Ed Hopkins & Robert M Seymour, 2004. "The Stability of Price Dispersion under Seller and Consumer Learning," ESE Discussion Papers 52, Edinburgh School of Economics, University of Edinburgh.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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Game Theory and Information
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- Hopkins, E., 1995. "Learning, Matching and Aggregation," G.R.E.Q.A.M. 95a20, Universite Aix-Marseille III.
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Elsevier, vol. 29(1-2), pages 138-150, October.
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