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Simultaneous Search for Differentiated Products: The Impact of Search Costs and Firm Prominence

Author

Listed:
  • José L Moraga-González
  • Zsolt Sándor
  • Matthijs R Wildenbeest

Abstract

We extend the literature on simultaneous search by allowing for differentiated products and search cost heterogeneity. We show conditions under which a symmetric price equilibrium exists. We provide a necessary and sufficient condition under which an increase in search costs may result in a lower, equal or higher equilibrium price. We extend this analysis to the case with more than two firms. The effects of prominence on equilibrium prices are also studied. The prominent firm charges a higher price than the non-prominent firm and both their prices are below the symmetric equilibrium price. Consequently, market prominence increases the consumers’ surplus.

Suggested Citation

  • José L Moraga-González & Zsolt Sándor & Matthijs R Wildenbeest, 2021. "Simultaneous Search for Differentiated Products: The Impact of Search Costs and Firm Prominence," The Economic Journal, Royal Economic Society, vol. 131(635), pages 1308-1330.
    • Handle: RePEc:oup:econjl:v:131:y:2021:i:635:p:1308-1330.
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    File URL: http://hdl.handle.net/10.1093/ej/ueaa075
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    Cited by:

    1. Atayev, Atabek, 2022. "Uncertain product availability in search markets," Journal of Economic Theory, Elsevier, vol. 204(C).
    2. Makoto Hanazono & Noritaka Kudoh, 2024. "Prominence And Market Power: Asymmetric Oligopoly With Sequential Consumer Search," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 65(3), pages 1249-1281, August.
    3. Atayev, Atabek, 2023. "Information asymmetry and search intensity," ZEW Discussion Papers 23-043, ZEW - Leibniz Centre for European Economic Research.
    4. Li, Sanxi & Sun, Hailin & Yu, Jun, 2023. "Competitive targeted online advertising," International Journal of Industrial Organization, Elsevier, vol. 87(C).
    5. Martin, Simon, 2020. "Market transparency and consumer search - Evidence from the German retail gasoline market," DICE Discussion Papers 350, Heinrich Heine University Düsseldorf, Düsseldorf Institute for Competition Economics (DICE).

    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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