Nonsequential search equilibrium with search cost heterogeneity
AbstractWe 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 InfoPaper provided by IESE Business School in its series IESE Research Papers with number D/869.
Length: 20 pages
Date of creation: 13 Jul 2010
Date of revision:
nonsequential search; oligopoly; arbitrary search cost distributions;
Other versions of this item:
- Jose Luis Moraga-Gonzalez & Zsolt Sandor & Matthijs R. Wildenbeest, 2010. "Nonsequential Search Equilibrium with Search Cost Heterogeneity," Working Papers 2010-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
- NEP-ALL-2010-09-25 (All new papers)
- NEP-CMP-2010-09-25 (Computational Economics)
- NEP-COM-2010-09-25 (Industrial Competition)
- NEP-DGE-2010-09-25 (Dynamic General Equilibrium)
- NEP-MIC-2010-09-25 (Microeconomics)
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.:
- 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.
- Lach, Saul & Moraga-González, José-Luis, 2009.
"Asymmetric Price Effects of Competition,"
CEPR Discussion Papers
7319, C.E.P.R. Discussion Papers.
- 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.
- 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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