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Inflation, Price Competition and Consumer Search Technology

  • Makoto Watanabe

    ()

This paper studies an (S, s) pricing model from the perspective of inflation and price competition in search markets. I present a model in which consumers'search technologies can influence firms' price setting, price dispersion, and the market structure. The result shows that although price competition among firms is more intensified in markets where consumers' search technologies are more efficient, price inflation is counter-intuitively, more likely to increase monopoly power of firms and to stimulate entry in these markets. The model also provides new empirical implications for firms' price setting behaviors.

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Paper provided by Universidad Carlos III, Departamento de Economía in its series Economics Working Papers with number we065623.

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Date of creation: Oct 2006
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Handle: RePEc:cte:werepe:we065623
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