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Firms' Strategies For Reducing The Effectiveness Of Consumer Price Search

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  • Ireland, Norman J

    (Department of Economics, University of Warwick)

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    Abstract

    This paper considers a simple model of competition based on some buyers making price comparisons between two suppliers. The difficulties of making appropriate comparisons are made greater by exclusive dealer agreements and restrictions, and by suppliers trading under more than one name. It is argued that suppliers will set prices using mixed strategies, and that prices become less competitive as price comparisons become more difficult. The implications for competition policy are considered in the light of recent judgements of the UK’s Office of Fair Trading and the European Court of Justice.

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    File URL: http://www2.warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp627.pdf
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    Bibliographic Info

    Paper provided by University of Warwick, Department of Economics in its series The Warwick Economics Research Paper Series (TWERPS) with number 627.

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    Length: 28 pages
    Date of creation: 2002
    Date of revision:
    Handle: RePEc:wrk:warwec:627

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    Web page: http://www2.warwick.ac.uk/fac/soc/economics/
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    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.:
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    1. Steven Salop & Joseph Stiglitz, 1977. "Bargains and ripoffs: a model of monopolistically competitive price dispersion," Special Studies Papers 94, Board of Governors of the Federal Reserve System (U.S.).
    2. Pratt, John W & Wise, David A & Zeckhauser, Richard, 1979. "Price Differences in Almost Competitive Markets," The Quarterly Journal of Economics, MIT Press, vol. 93(2), pages 189-211, May.
    3. Gabszewicz, Jean J. & Garella, Paolo, 1986. "Subjective price search and price competition," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 305-316, September.
    4. Ireland, Norman J, 1993. "The Provision of Information in a Bertrand Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 41(1), pages 61-76, March.
    5. Arnold, Michael A, 2000. "Costly Search, Capacity Constraints, and Bertrand Equilibrium Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 117-31, February.
    6. Wilde, Louis L. & Schwartz, Alan., . "Equilibrium Comparison Shopping," Working Papers 184, California Institute of Technology, Division of the Humanities and Social Sciences.
    7. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-59, September.
    8. Morten Hviid & Greg Shaffer, 1999. "Hassle Costs: The Achilles' Heel of Price-Matching Guarantees," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(4), pages 489-521, December.
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