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Price dispersion Author info | Abstract | Publisher info | Download info | Related research | Statistics ANDERSON, Simon
de PALMA, AndrŽ
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We model firm pricing given consumers follow simple reservation price rules. Such reservation rules are rational when consumers are sufficiently impatient. The equilibrium exhibits price dispersion in pure strategies, with lower price firms earning higher profits. The range of price dispersion increases with the number of firms: the highest price is the monopoly one, while the lowest price tends to marginal cost. The average transaction price remains substantially above marginal cost even in the limit. Introducing shoppers may increase market prices. Finally, we show that equilibrium prices become less dispersed as consumers become more patient.
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Paper provided by Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) in its series CORE Discussion Papers with number
2003032.
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Date of creation: 01 May 2003Date of revision:
Handle: RePEc:cor:louvco:2003032Contact details of provider: Postal: Voie du Roman Pays 34, 1348 Louvain-la-Neuve (Belgium) Phone: 32(10)474321 Fax: +32 10474301 Email: Web page: http://www.uclouvain.be/core More information through EDIRC
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Keywords: price dispersion ; reservation price rule ; passive search ; Other versions of this item:
Find related papers by JEL classification: D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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references Cited by : (explanations , 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.)
Il-Horn Hann & Kai-Lung Hui & Sang-Yong Tom Lee & Ivan P.L. Png, 2005.
"Sales and Promotions: A More General Model ,"
Industrial Organization
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