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On Multiplicity of Equilibria in Search Markets with Social Networks

In: Business Intelligence and Modelling

Author

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  • Evangelos Rouskas

    (Agricultural University of Athens)

Abstract

I challenge the uniqueness of the Burdett–Judd-type dispersed price equilibrium in markets with social networks by adding two new assumptions in Galeotti’s (Int Econ Rev, 51(4): 1159–1174, 2010) environment: (a) consumer heterogeneity with regard to search costs, and (b) seller prominence in the specific sense that all consumers with positive search costs who search once observe the price of the prominent seller with probability one. I demonstrate that in this modified setting there exist parameters for which multiplicity of the Burdett–Judd-type dispersed price equilibria is established. It turns out that a necessary condition for multiplicity of the Burdett–Judd-type dispersed price equilibria is that the percentage of consumers with zero search costs be relatively low. As the social networks widen, this condition becomes more restrictive.

Suggested Citation

  • Evangelos Rouskas, 2021. "On Multiplicity of Equilibria in Search Markets with Social Networks," Springer Proceedings in Business and Economics, in: Damianos P. Sakas & Dimitrios K. Nasiopoulos & Yulia Taratuhina (ed.), Business Intelligence and Modelling, pages 85-91, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-57065-1_7
    DOI: 10.1007/978-3-030-57065-1_7
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