Search with Learning and Price Adjustment Dynamics
AbstractThe author presents a model of consumer search with learning in which cost shocks have different short- and long-range effects on prices. In the short run, consumers confuse general cost shocks, common to all firms in the industry, with firm-specific shocks. In the case of a general cost increase, this promotes an excessive propensity to search, restraining the amount by which prices increase in the short run. Conversely, in the case of an idiosyncratic cost increase, consumers search too little, causing the prices of high-cost firms to overshoot. Copyright 1996, the President and Fellows of Harvard College and the Massachusetts Institute of Technology.
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Bibliographic InfoPaper provided by Tel Aviv - the Sackler Institute of Economic Studies in its series Papers with number 18-95.
Length: 29 pages
Date of creation: 1995
Date of revision:
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Postal: Tel-Aviv University, The Sackler Institute of Economic Studies, Ramat Aviv 69 978 Tel-Aviv, Israel
Web page: http://econ.tau.ac.il/
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- Fishman, Arthur, 1996. "Search with Learning and Price Adjustment Dynamics," The Quarterly Journal of Economics, MIT Press, vol. 111(1), pages 253-68, February.
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- Rauh, Michael T., 1997.
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- Michael T Rauh, 1997. "A Model of Temporary Search Market Equilibrium," Economics Working Paper Archive 392, The Johns Hopkins University,Department of Economics.
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- Maarten Janssen & Paul Pichler & Simon Weidenholzer, 2009. "Sequential Search with Incompletely Informed Consumers: Theory and Evidence from Retail Gasoline Markets," Vienna Economics Papers 0914, University of Vienna, Department of Economics.
- Cabral, Luís & Fishman, Arthur, 2012.
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- Luís Cabral & Arthur Fishman, 2011. "Business as Usual: A Consumer Search Theory of Sticky Prices and Asymmetric Price Adjustment," Working Papers 2011-01, Department of Economics, Bar-Ilan University.
- Joshua Sherman & Avi Weiss, 2012. "Price Response, Asymmetric Information, and Competition," Working Papers 2012-13, Department of Economics, Bar-Ilan University.
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