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Nonstandard Foundations of Equilibrium Search Models

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  • Michael T. Rauh

    (Department of Business Economics and Public Policy, Indiana University Kelley School of Business)

Abstract

We develop an equilibrium sequential search model which includes most of the literature as special cases. In particular, the model can accommodate heterogeneity in buyers’ search costs and demand functions and firms’ cost functions, with general demand and cost functions. We identify conditions which ensure existence of equilibrium in pure strategies, utilizing recent progress in the theory of large games by Khan and Sun. These conditions elucidate the essential structure of equilibrium search models. Although we focus on sequential search, our methodology can be used for other classes of equilibrium search models as well.

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File URL: http://www.bus.indiana.edu/riharbau/RePEc/iuk/wpaper/bepp2005-02-rauh.pdf
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Bibliographic Info

Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2005-02.

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Date of creation: 2005
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Publication status: Published in Journal of Economic Theory, 2007
Handle: RePEc:iuk:wpaper:2005-02

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Keywords: Search; equilibrium search models; nonstandard analysis;

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References

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  1. Rauh, Michael T., 2004. "Wage and price controls in the equilibrium sequential search model," European Economic Review, Elsevier, vol. 48(6), pages 1287-1300, December.
  2. KHAN , M. Ali & SUN, Yeneng, 1997. "On Loeb measures spaces and their significance for non-cooperative game theory," CORE Discussion Papers, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE) 1997012, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
  3. Spulber,Daniel F., 2009. "The Theory of the Firm," Cambridge Books, Cambridge University Press, number 9780521736602, 9.
  4. Rob, Rafael, 1985. "Equilibrium Price Distributions," Review of Economic Studies, Wiley Blackwell, Wiley Blackwell, vol. 52(3), pages 487-504, July.
  5. Michael T. Rauh, 2001. "Heterogeneous beliefs, price dispersion, and welfare-improving price controls," Economic Theory, Springer, vol. 18(3), pages 577-603.
  6. M Ali Khan & Kali P Rath & Yeneng Sun, 1994. "On the Existence of Pure Strategy Equilibria in Games with a Continuum of Players," Economics Working Paper Archive 381, The Johns Hopkins University,Department of Economics, revised Feb 1997.
  7. Michael T. Rauh, 2003. "Non-cooperative games with a continuum of players whose payoffs depend on summary statistics," Economic Theory, Springer, vol. 21(4), pages 901-906, 06.
  8. Benabou, Roland, 1988. "Search market equilibrium bilateral heterogeneity and repeat purchases," CEPREMAP Working Papers (Couverture Orange) 8806, CEPREMAP.
  9. Reinganum, Jennifer F, 1979. "A Simple Model of Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 87(4), pages 851-58, August.
  10. Rath, Kali P. & Yeneng Sun & Shinji Yamashige, 1995. "The nonexistence of symmetric equilibria in anonymous games with compact action spaces," Journal of Mathematical Economics, Elsevier, vol. 24(4), pages 331-346.
  11. Daniel F. Spulber, 1996. "Market Microstructure and Intermediation," Journal of Economic Perspectives, American Economic Association, vol. 10(3), pages 135-152, Summer.
  12. Carlson, John A & McAfee, R Preston, 1983. "Discrete Equilibrium Price Dispersion," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 91(3), pages 480-93, June.
  13. Michael T Rauh, 1997. "A Model of Temporary Search Market Equilibrium," Economics Working Paper Archive 392, The Johns Hopkins University,Department of Economics.
  14. Khan, M. Ali & Sun, Yeneng, 1999. "Non-cooperative games on hyperfinite Loeb spaces1," Journal of Mathematical Economics, Elsevier, vol. 31(4), pages 455-492, May.
  15. Robert, Jacques & Stahl, Dale O, II, 1993. "Informative Price Advertising in a Sequential Search Model," Econometrica, Econometric Society, Econometric Society, vol. 61(3), pages 657-86, May.
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Cited by:
  1. Marco A. Haan & José L. Moraga‐González, 2011. "Advertising for Attention in a Consumer Search Model," Economic Journal, Royal Economic Society, Royal Economic Society, vol. 121(552), pages 552-579, 05.
  2. Onsel Emre & Ali Hortacsu & Chad Syverson, 2005. "E-commerce and the Market Structure of Retail Industries," Working Papers 05-24, NET Institute, revised Oct 2005.
  3. Caglayan, Mustafa & Filiztekin, Alpay & Rauh, Michael T., 2008. "Inflation, price dispersion, and market structure," European Economic Review, Elsevier, vol. 52(7), pages 1187-1208, October.
  4. Michael Rauh, 2005. "Complementarity, Search, and Price Dispersion," Game Theory and Information, EconWPA 0508008, EconWPA.
  5. Rauh, Michael T., 2009. "Strategic complementarities and search market equilibrium," Games and Economic Behavior, Elsevier, vol. 66(2), pages 959-978, July.

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