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Partially Directed Search for Prices

Author

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  • Mauring, Eeva

Abstract

I analyse a model of partially directed search where searchers decide which firm to visit based on correct, but incomplete, information about firms' prices. Firms' pure strategies are allowed to be price distributions and in the unique symmetric pure-strategy equilibrium the price distributions are nondegenerate. The model's results rationalise empirical observations on promotions and changes in consumer prices: the lowest offered prices are unprofitable, the pdf of the price distribution is increasing, and the lowest prices are decreasing in the number of firms and the search cost.

Suggested Citation

  • Mauring, Eeva, 2021. "Partially Directed Search for Prices," CEPR Discussion Papers 16268, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:16268
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    More about this item

    Keywords

    Price dispersion; Partial information; Partially directed search; Sales; Unprofitable promotions;
    All these keywords.

    JEL classification:

    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets

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