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COSTLY BUYER SEARCH IN LABORATORY MARKETS WITH SELLER ADVERTISING -super-

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  • TIMOTHY N. CASON
  • SHAKUN D. MAGO

Abstract

In this experiment, sellers simultaneously choose prices and advertising strategies. Buyers either purchase at an advertised price or search sequentially for other prices. In the unique symmetric equilibrium, sellers charge a high unadvertised price or advertise a price chosen from a lower interval. Increases in search or advertising costs raise equilibrium prices and affect equilibrium advertising intensity. Empirical results are consistent with most comparative static predictions. Sellers, however, price much lower and advertise more intensely than predicted. Consequently, market outcomes more closely resemble a perfect information, Bertrand-like equilibrium than the imperfect information, mixed strategy equilibrium with significant seller market power. Copyright 2010 The Authors. Journal compilation 2010 Blackwell Publishing Ltd. and the Editorial Board of The Journal of Industrial Economics.

Suggested Citation

  • Timothy N. Cason & Shakun D. Mago, 2010. "COSTLY BUYER SEARCH IN LABORATORY MARKETS WITH SELLER ADVERTISING -super-," Journal of Industrial Economics, Wiley Blackwell, vol. 58(2), pages 424-449, June.
  • Handle: RePEc:bla:jindec:v:58:y:2010:i:2:p:424-449
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    References listed on IDEAS

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    Cited by:

    1. Dmitry Ryvkin & Danila Serra, 2015. "Is more competition always better? An experimental study of extortionary corruption," Working Papers wp2015_10_01, Department of Economics, Florida State University.
    2. Bayer, Ralph-C. & Ke, Changxia, 2013. "Discounts and consumer search behavior: The role of framing," Journal of Economic Psychology, Elsevier, vol. 39(C), pages 215-224.

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