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Consumer Search and Oligopolistic Pricing: An Empirical Investigation

Listed author(s):
  • Maarten C. W. Janssen
  • José Luis Moraga-González
  • Matthijs R. Wildenbeest

This paper presents an empirical examination of oligopoly pricing and consumer search. The theoretical model allows for sequential and non-sequential search and, using the theoretical restrictions firm and consumer behavior impose on the data, we study the empirical validity of the models. Two equilibria arise: one with costless search and the other with costly search. We find that the costless search equilibrium works well for products with a relatively low value, and, by implication, a small number of sellers. By contrast, the costly search equilibrium explains the observed data in a manner that is consistent with the underlying theoretical model for almost all products (for 86 out of 87!).

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2004/wp-cesifo-2004-10/cesifo1_wp1292.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 1292.

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Date of creation: 2004
Handle: RePEc:ces:ceswps:_1292
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