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Product differentiation and equilibrium price with partial product search

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  • Liu, Lin
  • Wang, X. Henry

Abstract

Anderson and Renault (1999) show a U-shaped relationship between firms’ equilibrium prices and product differentiation. Through a simultaneous search model with partial depth, we show that such a U-shaped relationship emerges (vanishes) when search depth is fixed (chosen by consumers).

Suggested Citation

  • Liu, Lin & Wang, X. Henry, 2021. "Product differentiation and equilibrium price with partial product search," Economics Letters, Elsevier, vol. 205(C).
    • Handle: RePEc:eee:ecolet:v:205:y:2021:i:c:s0165176521002093
    DOI: 10.1016/j.econlet.2021.109932
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    References listed on IDEAS

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    1. Jeffrey M. Perloff & Steven C. Salop, 1985. "Equilibrium with Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 52(1), pages 107-120.
    2. Lin Liu & Anthony Dukes, 2016. "Consumer Search with Limited Product Evaluation," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 25(1), pages 32-55, March.
    3. Heski Bar‐Isaac & Guillermo Caruana & Vicente Cuñat, 2012. "Information Gathering Externalities for a Multi‐Attribute Good," Journal of Industrial Economics, Wiley Blackwell, vol. 60(1), pages 162-185, March.
    4. Ke, T. Tony & Villas-Boas, J. Miguel, 2019. "Optimal learning before choice," Journal of Economic Theory, Elsevier, vol. 180(C), pages 383-437.
    5. Jidong Zhou, 2020. "Improved Information in Search Markets," Cowles Foundation Discussion Papers 2264, Cowles Foundation for Research in Economics, Yale University.
    6. Simon P. Anderson & Regis Renault, 1999. "Pricing, Product Diversity, and Search Costs: A Bertrand-Chamberlin-Diamond Model," RAND Journal of Economics, The RAND Corporation, vol. 30(4), pages 719-735, Winter.
    7. Fernando Branco & Monic Sun & J. Miguel Villas-Boas, 2012. "Optimal Search for Product Information," Management Science, INFORMS, vol. 58(11), pages 2037-2056, November.
    8. Cardell, N. Scott, 1997. "Variance Components Structures for the Extreme-Value and Logistic Distributions with Application to Models of Heterogeneity," Econometric Theory, Cambridge University Press, vol. 13(2), pages 185-213, April.
    9. Anthony Dukes & Lin Liu, 2016. "Online Shopping Intermediaries: The Strategic Design of Search Environments," Management Science, INFORMS, vol. 62(4), pages 1064-1077, April.
    10. Olszewski, Wojciech & Wolinsky, Asher, 2016. "Search for an object with two attributes," Journal of Economic Theory, Elsevier, vol. 161(C), pages 145-160.
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    Cited by:

    1. Liu, Lin & Wang, X. Henry, 2023. "Partial sequential search and product differentiation," Economics Letters, Elsevier, vol. 225(C).

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    More about this item

    Keywords

    Search; Partial-search depth; Price; Product differentiation; Competition;
    All these keywords.

    JEL classification:

    • 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
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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