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Skimming through search

Author

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  • Rouskas Evangelos

    (Agricultural University of Athens, Athens, Greece)

Abstract

I examine a two-period duopolistic market for a durable good where firms compete in prices. Consumers are heterogeneous and can be described according to the following characteristics (i) high valuation and high search intensity; (ii) high valuation and low search intensity; (iii) low valuation and high search intensity; and (iv) low valuation and low search intensity. The market exhibits a new version of the so-called Coasian dynamics. The firms engage in intertemporal price discrimination and only consumers with high valuation and low search intensity purchase the product early. This result is based on a property which dictates that the consumers with high valuation and low search intensity are the most impatient. I call this the skimming through search property. When the difference between the high and the low valuation is small, there is positive probability that the prices in the first period are lower than the prices in the second period, so each firm may set a decreasing sequence of prices in a stochastic sense. Furthermore, when the percentage of consumers with high valuation increases, all consumers pay lower prices. This inter-consumer externality resembles the positive externality caused by an increase in market transparency.

Suggested Citation

  • Rouskas Evangelos, 2021. "Skimming through search," German Economic Review, De Gruyter, vol. 22(2), pages 129-152, May.
    • Handle: RePEc:bpj:germec:v:22:y:2021:i:2:p:129-152:n:5
    DOI: 10.1515/ger-2019-1067
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    More about this item

    Keywords

    search; consumer heterogeneity; intertemporal price discrimination; delay;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness

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