A simple model of price dispersion
AbstractThis article considers a simple stock-flow matching model with fully informed market participants. Unlike in the standard matching literature, prices are assumed to be set ex-ante. When sellers pre-commit themselves to sell their products at an advertised price, the unique equilibrium is characterized by price dispersion due to the idiosyncratic match payoffs (in a marketplace with full information). This provides new insights into the price dispersion literature, where price dispersion is commonly assumed to be generated by a costly search of uninformed buyers.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by Federal Reserve Bank of Dallas in its series Globalization and Monetary Policy Institute Working Paper with number 112.
Date of creation: 2012
Date of revision:
Other versions of this item:
- C78 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Bargaining Theory; Matching Theory
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
This paper has been announced in the following NEP Reports:
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.:
- Axel, Bo, 1977. " Search Market Equilibrium," Scandinavian Journal of Economics, Wiley Blackwell, vol. 79(1), pages 20-40.
- Coles, Melvyn G, 1999. "Turnover Externalities with Marketplace Trading," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 851-68, November.
- Jennifer F. Reinganum, 1978.
"A Simple Model of Equilibrium Price Dispersion,"
335, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Nobuhiro Kiyotaki & Randall Wright, 1989.
"A contribution to the pure theory of money,"
123, Federal Reserve Bank of Minneapolis.
- Carlson, John A & McAfee, R Preston, 1983. "Discrete Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, vol. 91(3), pages 480-93, June.
- Peter Diamond, 1985.
"Consumer Differences and Prices in a Search Model,"
404, Massachusetts Institute of Technology (MIT), Department of Economics.
- Diamond, Peter A, 1982.
"Aggregate Demand Management in Search Equilibrium,"
Journal of Political Economy,
University of Chicago Press, vol. 90(5), pages 881-94, October.
- Burdett, Kenneth & Coles, Melvyn G., 1997.
"Steady State Price Distributions in a Noisy Search Equilibrium,"
Journal of Economic Theory,
Elsevier, vol. 72(1), pages 1-32, January.
- Kenneth Burdett and Melvyn G. Coles, . "Steady State Price Distributions in a Noisy Search Equilibrium," Economics Discussion Papers 450, University of Essex, Department of Economics.
- McAfee, R. Preston & McMillan, John, 1987. "Auctions with a stochastic number of bidders," Journal of Economic Theory, Elsevier, vol. 43(1), pages 1-19, October.
- Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
- Wilde, Louis L., 1977. "Labor market equilibrium under nonsequential search," Journal of Economic Theory, Elsevier, vol. 16(2), pages 373-393, December.
- Rob, Rafael, 1985. "Equilibrium Price Distributions," Review of Economic Studies, Wiley Blackwell, vol. 52(3), pages 487-504, July.
- Sutton, John, 1980. "A Model of Stochastic Equilibrium in a Quasi-Competitive Industry," Review of Economic Studies, Wiley Blackwell, vol. 47(4), pages 705-22, July.
- Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
- John McMillan & Peter B. Morgan, 1988. "Price Dispersion, Price Flexibility, and Repeated Purchasing," Canadian Journal of Economics, Canadian Economics Association, vol. 21(4), pages 883-902, November.
- Anonymous, 1994. "Research Updates," Journal of Food Distribution Research, Food Distribution Research Society, vol. 25(1), February.
- Salop, S & Stiglitz, J E, 1982. "The Theory of Sales: A Simple Model of Equilibrium Price Dispersion with Identical Agents," American Economic Review, American Economic Association, vol. 72(5), pages 1121-30, December.
- Stahl, Dale O., 1996. "Oligopolistic pricing with heterogeneous consumer search," International Journal of Industrial Organization, Elsevier, vol. 14(2), pages 243-268.
- McAfee R. Preston, 1995. "Multiproduct Equilibrium Price Dispersion," Journal of Economic Theory, Elsevier, vol. 67(1), pages 83-105, October.
- Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
- Preston McAfee, R. & McMillan, John, 1988. "Search mechanisms," Journal of Economic Theory, Elsevier, vol. 44(1), pages 99-123, February.
- Cressy, Robert C, 1983. "Goodwill, Intertemporal Price Dependence and the Repurchase Decision," Economic Journal, Royal Economic Society, vol. 93(372), pages 847-61, December.
- MacMinn, Richard D, 1980. "Search and Market Equilibrium," Journal of Political Economy, University of Chicago Press, vol. 88(2), pages 308-27, April.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Delia Rodriguez).
If references are entirely missing, you can add them using this form.