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Nonsequential search equilibrium with search cost heterogeneity

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Author Info

  • Moraga-Gonzalez, Jose L.

    ()
    (IESE Business School)

  • Sandor, Zsolt

    (University of Groningen)

  • Wildenbees, Matthijs R.

    (Kelly School of Business)

Abstract

We generalize the model of Burdett and Judd (1983) to the case where an arbitrary finite number of firms sells a homogeneous good to buyers who have heterogeneous search costs. We show that a price dispersed symmetric Nash equilibrium always exists. Numerical results show that the behavior of prices with respect to the number of firms hinges upon the shape of the search cost distribution: when search costs are relatively concentrated (dispersed), entry of firms leads to higher (lower) average prices.

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Bibliographic Info

Paper provided by IESE Business School in its series IESE Research Papers with number D/869.

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Length: 20 pages
Date of creation: 13 Jul 2010
Date of revision:
Handle: RePEc:ebg:iesewp:d-0869

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Postal: IESE Business School, Av Pearson 21, 08034 Barcelona, SPAIN
Web page: http://www.iese.edu/
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Keywords: nonsequential search; oligopoly; arbitrary search cost distributions;

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  1. Moraga-González, José Luis & Wildenbeest, Matthijs R., 2008. "Maximum likelihood estimation of search costs," European Economic Review, Elsevier, vol. 52(5), pages 820-848, July.
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Cited by:
  1. Lach, Saul & Moraga-González, José-Luis, 2009. "Asymmetric Price Effects of Competition," CEPR Discussion Papers 7319, C.E.P.R. Discussion Papers.
  2. Babur De los Santos & In Kyung Kim & Dmitry Lubensky, 2013. "Do MSRPs Decrease Prices?," Working Papers 2013-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
  3. Jose Luis Moraga-Gonzalez & Zsolt Sandor & Matthijs R. Wildenbeest, . "Do higher search costs make the markets less competitive?," Working Papers 2013-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.

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