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Consumer Search and Oligopolistic Pricing: An Empirical Investigation

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  • Maarten C.W. Janssen

    ()
    (Erasmus University Rotterdam)

  • Jose Luis Moraga-Gonzalez

    ()
    (University of Groningen)

  • Matthijs R. Wildenbeest

    ()
    (Erasmus University Rotterdam)

Abstract

This paper presents an empirical examination of oligopoly pricingand consumer search. The theoretical model allows for sequential andnon-sequential search and using the theoretical restrictions firm andconsumer behavior impose on the data we study the empirical validity of themodels. Two equilibria arise: one with costless search and the other withcostly search. We find that the costless search equilibrium works well forproducts with a relatively low value, and, by implication, a small number ofsellers. By contrast, the costly search equilibrium explains the observeddata in a manner that is consistent with the underlying theoretical modelfor almost all products (for 86 out of 87!).

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Bibliographic Info

Paper provided by Tinbergen Institute in its series Tinbergen Institute Discussion Papers with number 04-071/1.

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Date of creation: 29 Jun 2004
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Handle: RePEc:dgr:uvatin:20040071

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Web page: http://www.tinbergen.nl

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Keywords: consumer search; oligopoly; price dispersion; maximum likelihood estimation;

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  26. Maarten C.W. Janssen & Jose Luis Moraga-Gonzalez & Matthijs R. Wildenbeest, 2004. "A Note on Costly Sequential Search and Oligopoly Pricing," Tinbergen Institute Discussion Papers 04-068/1, Tinbergen Institute.
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  28. Maarten C.W. Janssen & Jose Luis Moraga-Gonzalez & Matthijs R. Wildenbeest, 2004. "A Note on Costly Sequential Search and Oligopoly Pricing," Tinbergen Institute Discussion Papers 04-068/1, Tinbergen Institute.
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