Advanced Search
MyIDEAS: Login

On Polarized Prices and Costly Sequential Search

Contents:

Author Info

  • Ruth G. Gilgenbach

    ()
    (Southern Methodist University)

Registered author(s):

    Abstract

    This paper presents a homogenous goods duopoly model of costly sequential consumer search with three classes of consumers: costless searchers; moderately costly searchers; and consumers for whom search costs are extremely high--higher than the value they attach to the good. Under certain conditions, the mixed-strategy Nash equilibrium price distribution is one where low and high, but never moderate, prices are charged. In equilibrium, free searchers will always search for both prices, very costly searchers never will, and moderately costly searchers will engage in actual search with positive probability. Interestingly, the existence of consumers who do not themselves search for prices allows for the introduction of an equilibrium where costly search does occur.

    Download Info

    If 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.
    File URL: ftp://ftp1.economics.smu.edu/WorkingPapers/2009/GILGENBACH-2009-11.pdf
    Our checks indicate that this address may not be valid because: 500 Failed to connect to FTP server ftp1.economics.smu.edu: Net::FTP: connect: 10060. If this is indeed the case, please notify (Bo Chen)
    Download Restriction: no

    Bibliographic Info

    Paper provided by Southern Methodist University, Department of Economics in its series Departmental Working Papers with number 0907.

    as in new window
    Length:
    Date of creation: Nov 2009
    Date of revision:
    Handle: RePEc:smu:ecowpa:0907

    Contact details of provider:
    Postal: Department of Economics, P.O. Box 750496, Southern Methodist University, Dallas, TX 75275-0496
    Phone: 214-768-2715
    Fax: 214-768-1821
    Web page: http://www.smu.edu/economics

    Related research

    Keywords: Some; Sequential search; pricing; duopoly.;

    Find related papers by JEL classification:

    This paper has been announced in the following NEP Reports:

    References

    References listed on IDEAS
    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.:
    as in new window
    1. Deneckere, Raymond J & Kovenock, Dan & Lee, Robert, 1992. "A Model of Price Leadership Based on Consumer Loyalty," Journal of Industrial Economics, Wiley Blackwell, vol. 40(2), pages 147-56, June.
    2. Janssen, Maarten C.W. & Moraga-Gonzalez, Jose Luis & Wildenbeest, Matthijs R., 2005. "Truly costly sequential search and oligopolistic pricing," International Journal of Industrial Organization, Elsevier, vol. 23(5-6), pages 451-466, June.
    3. Burdett, Kenneth & Judd, Kenneth L, 1983. "Equilibrium Price Dispersion," Econometrica, Econometric Society, vol. 51(4), pages 955-69, July.
    4. Stiglitz, Joseph E, 1987. "Competition and the Number of Firms in a Market: Are Duopolies More Competitive than Atomistic Markets?," Journal of Political Economy, University of Chicago Press, vol. 95(5), pages 1041-61, October.
    5. Narasimhan, Chakravarthi, 1988. "Competitive Promotional Strategies," The Journal of Business, University of Chicago Press, vol. 61(4), pages 427-49, October.
    6. Robert, Jacques & Stahl, Dale O, II, 1993. "Informative Price Advertising in a Sequential Search Model," Econometrica, Econometric Society, vol. 61(3), pages 657-86, May.
    7. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
    8. Maarten C. W. Janssen & José Luis Moraga-González, 2004. "Strategic Pricing, Consumer Search and the Number of Firms," Review of Economic Studies, Wiley Blackwell, vol. 71(4), pages 1089-1118, October.
    9. Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
    10. Janssen, Maarten C.W. & Non, Marielle C., 2008. "Advertising and consumer search in a duopoly model," International Journal of Industrial Organization, Elsevier, vol. 26(1), pages 354-371, January.
    11. Roy, Santanu, 2000. "Strategic segmentation of a market," International Journal of Industrial Organization, Elsevier, vol. 18(8), pages 1279-1290, December.
    12. Butters, Gerard R, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 465-91, October.
    13. Maarten C.W. Janssen & Jose Luis Moraga-Gonzalez & Matthijs R. Wildenbeest, 2004. "A Note on Costly Sequential Search and Oligopoly Pricing," Tinbergen Institute Discussion Papers 04-068/1, Tinbergen Institute.
    14. Grossman, Gene M & Shapiro, Carl, 1984. "Informative Advertising with Differentiated Products," Review of Economic Studies, Wiley Blackwell, vol. 51(1), pages 63-81, January.
    15. Maarten C. W. Janssen & José Luis Moraga-Gonz�lez, 2004. "Strategic Pricing, Consumer Search and the Number of Firms," Review of Economic Studies, Oxford University Press, vol. 71(4), pages 1089-1118.
    16. Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
    Full references (including those not matched with items on IDEAS)

    Citations

    Lists

    This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

    Statistics

    Access and download statistics

    Corrections

    When requesting a correction, please mention this item's handle: RePEc:smu:ecowpa:0907. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Bo Chen).

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If references are entirely missing, you can add them using this form.

    If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.