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Price Cycles and Booms: Dynamic Search Equilibrium

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  • Fershtman, Chaim
  • Fishman, Arthur

Abstract

Search theory has been extensively and successfully applied to explain the persistence of price dispersion. This paper presents an explicitly dynamic search model that is able to account for cyclical patterns of prices and demand over time. These cyclical features of the model are the consequence of the dynamic strategic interaction between buyers and firms and do not require the presence of extraneous factors such as shocks or heterogeneity of agents in order to obtain. The model builds on earlier work by Kenneth Burdett and Kenneth L. Judd and may be interpreted as a dynamic extension of their model. Copyright 1992 by American Economic Association.

Suggested Citation

  • Fershtman, Chaim & Fishman, Arthur, 1992. "Price Cycles and Booms: Dynamic Search Equilibrium," American Economic Review, American Economic Association, vol. 82(5), pages 1221-1233, December.
  • Handle: RePEc:aea:aecrev:v:82:y:1992:i:5:p:1221-33
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    References listed on IDEAS

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    1. Steven J. Davis & John Haltiwanger, 1992. "Gross Job Creation, Gross Job Destruction, and Employment Reallocation," The Quarterly Journal of Economics, Oxford University Press, vol. 107(3), pages 819-863.
    2. Tsiddon, Daniel, 1991. "On the Stubbornness of Sticky Prices," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 32(1), pages 69-75, February.
    3. Kuran, Timur, 1983. "Asymmetric Price Rigidity and Inflationary Bias," American Economic Review, American Economic Association, pages 373-382.
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    Citations

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    Cited by:

    1. Ed Hopkins, "undated". "Price Dispersion: An Evolutionary Approach," Discussion Papers 1996-3, Edinburgh School of Economics, University of Edinburgh.
    2. Jun Honda, 2015. "Intermediary Search for Suppliers in Procurement Auctions," Department of Economics Working Papers wuwp203, Vienna University of Economics and Business, Department of Economics.
    3. Moraga-González, José Luis & Sándor, Zsolt & Wildenbeest, Matthijs R., 2017. "Nonsequential search equilibrium with search cost heterogeneity," International Journal of Industrial Organization, Elsevier, vol. 50(C), pages 392-414.
    4. Honda, Jun, 2015. "Intermediary Search for Suppliers in Procurement Auctions," Department of Economics Working Paper Series 4628, WU Vienna University of Economics and Business.
    5. Fishman, Arthur & Rob, Rafael, 1998. "Experimentation and Competition," Journal of Economic Theory, Elsevier, vol. 78(2), pages 299-320, February.
    6. Obradovits, Martin, 2014. "Austrian-style gasoline price regulation: How it may backfire," International Journal of Industrial Organization, Elsevier, vol. 32(C), pages 33-45.
    7. Maarten C.W. Janssen & Jose Luis Moraga-Gonzalez & Matthijs R. Wildenbeest, 2004. "Consumer Search and Oligopolistic Pricing: An Empirical Investigation," Tinbergen Institute Discussion Papers 04-071/1, Tinbergen Institute.
    8. Lach, Saul & Moraga-González, José-Luis, 2009. "Heterogeneous Price Information and the Effect of Competition," CEPR Discussion Papers 7319, C.E.P.R. Discussion Papers.
    9. Jose Luis Moraga-Gonzalez & Zsolt Sandor & Matthijs R. Wildenbeest, "undated". "Do higher search costs make the markets less competitive?," Working Papers 2013-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    10. Fishman, Arthur & Simhon, Avi, 2003. "Can Income Equality Increase Competitiveness?," Discussion Papers 14983, Hebrew University of Jerusalem, Department of Agricultural Economics and Management.
    11. Maarten C.W. Janssen & Jose Luis Moraga-Gonzalez & Matthijs R. Wildenbeest, 2004. "Consumer Search and Oligopolistic Pricing: An Empirical Investigation," Tinbergen Institute Discussion Papers 04-071/1, Tinbergen Institute.
    12. Noel, Michael D., 2012. "Edgeworth Price Cycles and intertemporal price discrimination," Energy Economics, Elsevier, vol. 34(4), pages 942-954.
    13. Kyle Bagwell & Garey Ramey, 1992. "The Diamond Paradox: A Dynamic Resolution," Discussion Papers 1013, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
    14. Stühmeier Torben, 2015. "Price Disclosure Rules and Consumer Price Comparison," The B.E. Journal of Economic Analysis & Policy, De Gruyter, pages 815-835.
    15. Glenn R. Mueller, 1999. "Real Estate Rental Growth Rates at Different Points in the Physical Market Cycle," Journal of Real Estate Research, American Real Estate Society, vol. 18(1), pages 131-150.
    16. Maarten Janssen & Alexei Parakhonyak & Anastasia Parakhonyak, 2014. "Non-reservation price equilibria and Consumer search," HSE Working papers WP BRP 51/EC/2014, National Research University Higher School of Economics.
    17. Montgomery, James D, 1999. "Adverse Selection and Employment Cycles," Journal of Labor Economics, University of Chicago Press, vol. 17(2), pages 281-297, April.
    18. Maarten Janssen & Paul Pichler & Simon Weidenholzer, 2009. "Sequential Search with Incompletely Informed Consumers: Theory and Evidence from Retail Gasoline Markets," Vienna Economics Papers 0914, University of Vienna, Department of Economics.
    19. repec:eee:jetheo:v:172:y:2017:i:c:p:120-162 is not listed on IDEAS

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