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A theory of search with deadlines and uncertain recall

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  • Ş. Akın

    ()

  • Brennan Platt

    ()

Abstract

We ask how the ability to recall past prices affects the dynamics of search and price formation. In the model, buyers have limited time to purchase a good and face uncertainty regarding the availability of past price quotes in the future. Sellers cannot observe a potential buyer’s remaining time until deadline nor her quote history, and hence post prices that weigh the probability of sale versus the profit once sold. We find that, in contrast to conventional wisdom, reducing the consumer’s recall ability may actually improve his expected utility because it lowers the average expected price in the market and reduces the duration of search. Copyright Springer-Verlag Berlin Heidelberg 2014

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File URL: http://hdl.handle.net/10.1007/s00199-013-0740-8
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Bibliographic Info

Article provided by Springer in its journal Economic Theory.

Volume (Year): 55 (2014)
Issue (Month): 1 (January)
Pages: 101-133

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Handle: RePEc:spr:joecth:v:55:y:2014:i:1:p:101-133

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Related research

Keywords: Equilibrium search; Uncertain recall; Deadlines ; Price posting; Reservation prices; D40; D83;

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References

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  1. A theory of search with deadlines and uncertain recall
    by Christian Zimmermann in NEP-DGE blog on 2012-07-15 16:31:25

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