IDEAS home Printed from https://ideas.repec.org/a/bpj/bejtec/v11y2011i1n24.html
   My bibliography  Save this article

Sellers Like Clusters

Author

Listed:
  • Kultti Klaus

    () (University of Helsinki and Helsinki Center of Economic Research (HECER))

Abstract

I study an economy with sellers and buyers. The sellers are capacity constrained and face stochastic demand. They may locate close to each other, cluster, or separately. In the former case the buyers can visit any of them, while in the latter case the buyers can visit only one of them. The sellers post prices which are observed by the buyers who base their decision to contact sellers on the prices. I explicitly derive the equilibrium prices or price strategies in the clustered and in the non-clustered market for an arbitrary distribution of demand. I show that the clustered market often yields higher profits than the non-clustered. Finally, I allow the sellers to choose both the market and prices, and show that the equilibrium market structure features clustering.

Suggested Citation

  • Kultti Klaus, 2011. "Sellers Like Clusters," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 11(1), pages 1-28, December.
  • Handle: RePEc:bpj:bejtec:v:11:y:2011:i:1:n:24
    as

    Download full text from publisher

    File URL: https://www.degruyter.com/view/j/bejte.2011.11.issue-1/1935-1704.1756/1935-1704.1756.xml?format=INT
    Download Restriction: For access to full text, subscription to the journal or payment for the individual article is required.

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-1127, September.
    2. Stahl, Konrad, 1982. "Differentiated Products, Consumer Search, and Locational Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 31(1-2), pages 97-113, September.
    3. Jeffrey H. Fischer & Joseph E. Harrington Jr., 1996. "Product Variety and Firm Agglomeration," RAND Journal of Economics, The RAND Corporation, vol. 27(2), pages 281-309, Summer.
    4. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    5. Peters, Michael, 1991. "Ex Ante Price Offers in Matching Games Non-steady States," Econometrica, Econometric Society, vol. 59(5), pages 1425-1454, September.
    6. Dudey, Marc, 1990. "Competition by Choice: The Effect of Consumer Search on Firm Location Decisions," American Economic Review, American Economic Association, vol. 80(5), pages 1092-1104, December.
    7. David B. Ridley, 2008. "Herding versus Hotelling: Market Entry with Costly Information," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 17(3), pages 607-631, September.
    8. Raymond Deneckere & James Peck, 1995. "Competition Over Price and Service Rate When Demand is Stochastic: A Strategic Analysis," RAND Journal of Economics, The RAND Corporation, vol. 26(1), pages 148-162, Spring.
    9. Lu, Xiaohua & McAfee, R. Preston, 1996. "The Evolutionary Stability of Auctions over Bargaining," Games and Economic Behavior, Elsevier, vol. 15(2), pages 228-254, August.
    10. de Palma, A, et al, 1985. "The Principle of Minimum Differentiation Holds under Sufficient Heterogeneity," Econometrica, Econometric Society, vol. 53(4), pages 767-781, July.
    11. Asher Wolinsky, 1983. "Retail Trade Concentration Due to Consumers' Imperfect Information," Bell Journal of Economics, The RAND Corporation, vol. 14(1), pages 275-282, Spring.
    12. repec:ulb:ulbeco:2013/1759 is not listed on IDEAS
    13. Ritzberger, Klaus, 2009. "Price competition with population uncertainty," Mathematical Social Sciences, Elsevier, vol. 58(2), pages 145-157, September.
    14. Konishi, Hideo, 2005. "Concentration of competing retail stores," Journal of Urban Economics, Elsevier, vol. 58(3), pages 488-512, November.
    15. Robert Shimer, 2005. "The Assignment of Workers to Jobs in an Economy with Coordination Frictions," Journal of Political Economy, University of Chicago Press, vol. 113(5), pages 996-1025, October.
    16. Gerard R. Butters, 1977. "Equilibrium Distributions of Sales and Advertising Prices," Review of Economic Studies, Oxford University Press, vol. 44(3), pages 465-491.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Godenhielm Mats & Kultti Klaus, 2015. "Directed Search with Endogenous Capacity," The B.E. Journal of Theoretical Economics, De Gruyter, vol. 15(2), pages 211-249, July.
    2. Klaus Kultti & Eeva Mauring, 2014. "Low price signals high capacity," Journal of Economics, Springer, vol. 112(2), pages 165-181, June.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:bpj:bejtec:v:11:y:2011:i:1:n:24. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Peter Golla). General contact details of provider: https://www.degruyter.com .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.