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Oligopolistic Pricing with Sequential Consumer Search


  • Stahl, Dale O, II


N identical stores compete by choosing prices for a homogeneous good with constant marginal costs. Consumers search sequentially with perfect recall for the lowest price. One class of consumers, called shoppers, have zero search costs, while all other consumers have a positive search cost, c. There is a unique symmetric Nash equilibrium price distribution with the property that it changes smoothly from "marginal cost pricing" when all consumers are shoppers and/or c = 0 and "monopoly pricing" when no consumers are shoppers. Remarkably, as the number of stores increases, the Nash equilibrium becomes more monopolistic. Copyright 1989 by American Economic Association.

Suggested Citation

  • Stahl, Dale O, II, 1989. "Oligopolistic Pricing with Sequential Consumer Search," American Economic Review, American Economic Association, vol. 79(4), pages 700-712, September.
  • Handle: RePEc:aea:aecrev:v:79:y:1989:i:4:p:700-712

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    References listed on IDEAS

    1. Alan S. Blinder, 1981. "Retail Inventory Behavior and Business Fluctuations," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 12(2), pages 443-520.
    2. Robert J. Barro, 1972. "A Theory of Monopolistic Price Adjustment," Review of Economic Studies, Oxford University Press, vol. 39(1), pages 17-26.
    3. Hamermesh, Daniel S., 1987. "The demand for labor in the long run," Handbook of Labor Economics,in: O. Ashenfelter & R. Layard (ed.), Handbook of Labor Economics, edition 1, volume 1, chapter 8, pages 429-471 Elsevier.
    4. Burgess, Simon M, 1988. "Employment Adjustment in UK Manufacturing," Economic Journal, Royal Economic Society, vol. 98(389), pages 81-103, March.
    5. Sargent, Thomas J, 1978. "Estimation of Dynamic Labor Demand Schedules under Rational Expectations," Journal of Political Economy, University of Chicago Press, vol. 86(6), pages 1009-1044, December.
    6. P. K. Trivedi, 1985. "Distributed Lags, Aggregation and Compounding: Some Econometric Implications," Review of Economic Studies, Oxford University Press, vol. 52(1), pages 19-35.
    7. Robert J. Gordon, 1979. "The "End-of-Expansion" Phenomenon in Short-Run Productivity Behavior," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 10(2), pages 447-462.
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