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Nonsequential search equilibrium with search cost heterogeneity

Author

Listed:
  • Moraga-Gonzalez, Jose L.

    () (IESE Business School)

  • Sandor, Zsolt

    (University of Groningen)

  • Wildenbees, Matthijs R.

    (Kelly School of Business)

Abstract

We generalize the model of Burdett and Judd (1983) to the case where an arbitrary finite number of firms sells a homogeneous good to buyers who have heterogeneous search costs. We show that a price dispersed symmetric Nash equilibrium always exists. Numerical results show that the behavior of prices with respect to the number of firms hinges upon the shape of the search cost distribution: when search costs are relatively concentrated (dispersed), entry of firms leads to higher (lower) average prices.

Suggested Citation

  • Moraga-Gonzalez, Jose L. & Sandor, Zsolt & Wildenbees, Matthijs R., 2010. "Nonsequential search equilibrium with search cost heterogeneity," IESE Research Papers D/869, IESE Business School.
  • Handle: RePEc:ebg:iesewp:d-0869
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    File URL: http://www.iese.edu/research/pdfs/DI-0869-E.pdf
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    References listed on IDEAS

    as
    1. Moraga-González, José Luis & Wildenbeest, Matthijs R., 2008. "Maximum likelihood estimation of search costs," European Economic Review, Elsevier, vol. 52(5), pages 820-848, July.
    2. Han Hong & Matthew Shum, 2006. "Using price distributions to estimate search costs," RAND Journal of Economics, RAND Corporation, vol. 37(2), pages 257-275, June.
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    Cited by:

    1. Jason R. Blevins & Garrett T. Senney, 2014. "Dynamic Selection and Distributional Bounds on Search Costs in Dynamic Unit-Demand Models," Working Papers 14-02, Ohio State University, Department of Economics.
    2. Yankov, Vladimir, 2014. "In Search of a Risk-free Asset," Finance and Economics Discussion Series 2014-108, Board of Governors of the Federal Reserve System (U.S.).
    3. Babur De los Santos & In Kyung Kim & Dmitry Lubensky, 2013. "Do MSRPs Decrease Prices?," Working Papers 2013-13, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    4. Lach, Saul & Moraga-González, José-Luis, 2009. "Heterogeneous Price Information and the Effect of Competition," CEPR Discussion Papers 7319, C.E.P.R. Discussion Papers.
    5. Jose Luis Moraga-Gonzalez & Zsolt Sandor & Matthijs R. Wildenbeest, "undated". "Do higher search costs make the markets less competitive?," Working Papers 2013-08, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    6. repec:spr:series:v:9:y:2018:i:1:d:10.1007_s13209-018-0172-6 is not listed on IDEAS

    More about this item

    Keywords

    nonsequential search; oligopoly; arbitrary search cost distributions;

    JEL classification:

    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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