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Price Distribution in a Symmetric Economy

Author

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  • Kultti Klaus

    () (University of Helsinki)

  • Virrankoski Juha

    () (Helsinki School of Economics)

Abstract

We consider an economy with symmetric buyers and symmetric sellers. The sellers are in locations and post prices simultaneously. The buyers observe the prices, and each buyer visits one location. The buyers act independently and employ symmetric mixed strategies. We show that when there are several sellers in a location, the Nash equilibrium features price dispersion, i.e. the sellers post different prices. The equilibrium strategy of the sellers is a non-atomic distribution.

Suggested Citation

  • Kultti Klaus & Virrankoski Juha, 2003. "Price Distribution in a Symmetric Economy," The B.E. Journal of Macroeconomics, De Gruyter, vol. 3(1), pages 1-21, April.
  • Handle: RePEc:bpj:bejmac:v:topics.3:y:2003:i:1:n:5
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    References listed on IDEAS

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    Cited by:

    1. Pedro Mazeda Gil & Fernanda Figueiredo & Oscar Afonso, 2009. "Equilibrium Price Distribution with Directed Technical Change," FEP Working Papers 327, Universidade do Porto, Faculdade de Economia do Porto.
    2. Kultti, Klaus & Virrankoski, Juha, 2004. "Price distribution in a random matching model," Economics Letters, Elsevier, vol. 83(3), pages 405-409, June.
    3. Marja-Liisa Halko & Klaus Kultti & Juha Virrankoski, 2005. "Wage Distribution with a Two-Sided Job Auction," 2005 Meeting Papers 518, Society for Economic Dynamics.
    4. Gil, Pedro Mazeda & Figueiredo, Fernanda & Afonso, Oscar, 2010. "Equilibrium price distribution with directed technical change," Economics Letters, Elsevier, vol. 108(2), pages 130-133, August.

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