The Stability of Price Dispersion under Seller and Consumer Learning
In many markets, it is possible to find rival sellers charging different prices for the same good. Earlier research has attempted to explain this phenomenon by demonstrating the existence of dispersed price equilibria when consumers must make use of costly search to discover prices. We ask whether such equilibria can be learned when sellers adjust prices adaptively in response to current market conditions. With consumer behavior fixed, convergence to a dispersed price equilibrium is possible in some cases. However, once consumer learning is introduced, the monopoly outcome first found by Diamond ("Journal of Economic Theory"3 (1971), 156-68) is the only stable equilibrium. Copyright 2002 by the Economics Department of the University of Pennsylvania and Osaka University Institute of Social and Economic Research Association
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Volume (Year): 43 (2002)
Issue (Month): 4 (November)
|Contact details of provider:|| Postal: 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297|
Phone: (215) 898-8487
Fax: (215) 573-2057
Web page: http://www.econ.upenn.edu/ier
More information through EDIRC
|Order Information:|| Web: http://www.blackwellpublishing.com/subs.asp?ref=0020-6598 Email: |
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Rothschild, Michael, 1973. "Models of Market Organization with Imperfect Information: A Survey," Journal of Political Economy, University of Chicago Press, vol. 81(6), pages 1283-1308, Nov.-Dec..
- Erev, Ido & Roth, Alvin E, 1998. "Predicting How People Play Games: Reinforcement Learning in Experimental Games with Unique, Mixed Strategy Equilibria," American Economic Review, American Economic Association, vol. 88(4), pages 848-881, September.
- Cason, Timothy N. & Friedman, Daniel, 2003.
"Buyer search and price dispersion: a laboratory study,"
Journal of Economic Theory,
Elsevier, vol. 112(2), pages 232-260, October.
- Timothy N. Cason & Daniel Friedman, 2000. "Buyer Search and Price Dispersion: A Laboratory Study," Econometric Society World Congress 2000 Contributed Papers 1549, Econometric Society.
- Schlag, Karl H., 1998.
"Why Imitate, and If So, How?, : A Boundedly Rational Approach to Multi-armed Bandits,"
Journal of Economic Theory,
Elsevier, vol. 78(1), pages 130-156, January.
- Karl H. Schlag, "undated". "Why Imitate, and if so, How? A Bounded Rational Approach to Multi- Armed Bandits," ELSE working papers 028, ESRC Centre on Economics Learning and Social Evolution.
- Schlag, Karl H., 1994. "Why Imitate, and if so, How? Exploring a Model of Social Evolution," Discussion Paper Serie B 296, University of Bonn, Germany.
- Karl H. Schlag, 1995. "Why Imitate, and if so, How? A Bounded Rational Approach to Multi-Armed Bandits," Discussion Paper Serie B 361, University of Bonn, Germany, revised Mar 1996.
- JÃrg Oechssler & Frank Riedel, 2001. "Evolutionary dynamics on infinite strategy spaces," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 17(1), pages 141-162.
- Joerg Oechssler & Frank Riedel, 1998. "Evolutionary Dynamics on Infinite Strategy Spaces," Game Theory and Information 9805002, EconWPA, revised 05 Aug 1998.
- Oechssler, Joerg & Frank Riedel, 1999. "Evolutionary Dynamics on Infinite Strategy Spaces," Discussion Paper Serie A 606, University of Bonn, Germany.
- Oechssler, Jörg & Riedel, Frank, 1998. "Evolutionary dynamics on infinite strategy spaces," SFB 373 Discussion Papers 1998,68, Humboldt University of Berlin, Interdisciplinary Research Project 373: Quantification and Simulation of Economic Processes.
- Hopkins, Ed, 1999. "Learning, Matching, and Aggregation," Games and Economic Behavior, Elsevier, vol. 26(1), pages 79-110, January.
- Ed Hopkins, "undated". "Learning, Matching and Aggregation," Department of Economics 1996 : II, Edinburgh School of Economics, University of Edinburgh.
- Hopkins, E., 1995. "Learning, Matching and Aggregation," G.R.E.Q.A.M. 95a20, Universite Aix-Marseille III.
- Ed Hopkins, 1995. "Learning, Matching and Aggregation," ESE Discussion Papers 2, Edinburgh School of Economics, University of Edinburgh.
- Ed Hopkins, 1995. "Learning, Matching and Aggregation," Game Theory and Information 9512001, EconWPA.
- Ed Hopkins, "undated". "Learning, Matching and Aggregation," Discussion Papers 1996-2, Edinburgh School of Economics, University of Edinburgh.
- Ed Hopkins, "undated". "Learning, Matching and Aggregation," ELSE working papers 033, ESRC Centre on Economics Learning and Social Evolution.
- Hopkins, Ed, 1999. "A Note on Best Response Dynamics," Games and Economic Behavior, Elsevier, vol. 29(1-2), pages 138-150, October.
- Benabou Roland, 1993. "Search Market Equilibrium, Bilateral Heterogeneity, and Repeat Purchases," Journal of Economic Theory, Elsevier, vol. 60(1), pages 140-158, June.
- Benabou, Roland, 1988. "Search market equilibrium bilateral heterogeneity and repeat purchases," CEPREMAP Working Papers (Couverture Orange) 8806, CEPREMAP.
- Borgers, Tilman & Sarin, Rajiv, 1997. "Learning Through Reinforcement and Replicator Dynamics," Journal of Economic Theory, Elsevier, vol. 77(1), pages 1-14, November.
- Tilman Börgers & Rajiv Sarin, "undated". "Learning Through Reinforcement and Replicator Dynamics," ELSE working papers 051, ESRC Centre on Economics Learning and Social Evolution.
- T. Borgers & R. Sarin, 2010. "Learning Through Reinforcement and Replicator Dynamics," Levine's Working Paper Archive 380, David K. Levine.
- Wilde, Louis L, 1992. "Comparison Shopping as a Simultaneous Move Game," Economic Journal, Royal Economic Society, vol. 102(412), pages 562-569, May.
- Young, H Peyton, 1993. "The Evolution of Conventions," Econometrica, Econometric Society, vol. 61(1), pages 57-84, January. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:ier:iecrev:v:43:y:2002:i:4:p:1157-1190. 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: (Wiley-Blackwell Digital Licensing)or ()
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 references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link 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 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.