Dynamic Price Dispersion in a Bertrand-Edgeworth Model
AbstractThis paper considers a dynamic model of price competition in which sellers are endowed with one unit of the good and compete by posting prices in every period. Buyers each demand one unit of the good and have a common reservation price. They have full information regarding the prices posted by each firm in the market; hence, search is costless. The number of buyers coming to the market in each period is random. We characterize the dynamics of market prices and show that price dispersion persists over time.
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Bibliographic InfoPaper provided by University Library of Munich, Germany in its series MPRA Paper with number 9854.
Date of creation: Oct 2005
Date of revision: Dec 2007
Price Dispersion; Search Cost; Bertrand-Edgeworth Model;
Find related papers by JEL classification:
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- 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-2008-08-14 (All new papers)
- NEP-COM-2008-08-14 (Industrial Competition)
- NEP-MIC-2008-08-14 (Microeconomics)
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