IDEAS home Printed from
   My bibliography  Save this paper

Do Consumers Search for the Highest Price? Equilibrium and Monopolistic Optimum in Differentiated Products Markets


  • Schulz, Norbert
  • Stahl, Konrad


We develop a model of search among substitutes for the best combination of commodity variant and price, in which the structure of search costs can be manipulated by the suppliers of these variants, e.g. by joining an existing market or opening a new one. We analyse the subgame perfect equilibria arising in a multistage game involving specialized firms' choice of entry, variant and price; and compare them to a multiproduct monopolist's optimal choice. Together with the existence and uniqueness of (symmetric) equilibria we show that equilibrium prices increase in the number of substitutes sold in one market, and that a monopolist selling the same number of variants charges lower prices. The monopolist will also end up selling at least as much variety. Hence, in the situation considered here, monopoly tends to increase welfare.

Suggested Citation

  • Schulz, Norbert & Stahl, Konrad, 1995. "Do Consumers Search for the Highest Price? Equilibrium and Monopolistic Optimum in Differentiated Products Markets," CEPR Discussion Papers 1277, C.E.P.R. Discussion Papers.
  • Handle: RePEc:cpr:ceprdp:1277

    Download full text from publisher

    File URL:
    Download Restriction: CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Information; Monopoly; Oligopoly; Search;

    JEL classification:

    • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
    • 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


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cpr:ceprdp:1277. 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: (). General contact details of provider: .

    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.

    We have no references for this item. You can help adding them by using 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 RePEc Author Service 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.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.