Poisson Price Dispersion
AbstractWe study a competitive market for a homogeneous good, in which the only uncertainty concerns the number of identical sellers, who are sampled by a finite Poisson process from a continuum of potential participants. It is shown that, in equilibrium, there is price dispersion. Specifically, prices conform to a Poisson process on an interval, which is a proper subset of that between the sellers' cost and the buyers' reservation price. Although prices arbitrarily close to the latter may occur in equilibrium, they are less frequent than prices at the lower end of the pricing interval.
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Bibliographic InfoPaper provided by Vancouver School of Economics in its series Microeconomics.ca working papers with number halevy-05-07-26-12-10-45.
Length: 21 pages
Date of creation: 26 Jul 2005
Date of revision: 25 Feb 2014
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Random-player games; Poisson games; Uncertain number of sellers; Directed search.;
Find related papers by JEL classification:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D4 - Microeconomics - - Market Structure and Pricing
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
- L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
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