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Nonsequential Search Equilibrium with Search Cost Heterogeneity

Author

Listed:
  • Jose Luis Moraga-Gonzalez

    (University of Groningen and CESifo)

  • Zsolt Sandor

    (Universidad Carlos III de Madrid)

  • Matthijs R. Wildenbeest

    (Department of Business Economics and Public Policy, Indiana University Kelley 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

  • Jose Luis Moraga-Gonzalez & Zsolt Sandor & Matthijs R. Wildenbeest, 2010. "Nonsequential Search Equilibrium with Search Cost Heterogeneity," Working Papers 2010-11, Indiana University, Kelley School of Business, Department of Business Economics and Public Policy.
    • Handle: RePEc:iuk:wpaper:2010-11
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    References listed on IDEAS

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    Full references (including those not matched with items on IDEAS)

    Citations

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    Cited by:

    1. Dan Yavorsky & Elisabeth Honka & Keith Chen, 2021. "Consumer search in the U.S. auto industry: The role of dealership visits," Quantitative Marketing and Economics (QME), Springer, vol. 19(1), pages 1-52, March.
    2. Ryan Martin, 2020. "Identifying Consumer-Welfare Changes when Online Search Platforms Change Their List of Search Results," Staff Working Papers 20-5, Bank of Canada.
    3. De los Santos, Babur & Kim, In Kyung & Lubensky, Dmitry, 2018. "Do MSRPs decrease prices?," International Journal of Industrial Organization, Elsevier, vol. 59(C), pages 429-457.
      • 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. Araujo, Julia P. & Rodrigues, Mauro, 2020. "Evidence on search costs under hyperinflation in Brazil: The effect of Plano Real," Brazilian Review of Econometrics, Sociedade Brasileira de Econometria - SBE, vol. 40(1), August.
    5. 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.
    6. David P. Myatt & David Ronayne, 2023. "Asymmetric Models of Sales," Rationality and Competition Discussion Paper Series 450, CRC TRR 190 Rationality and Competition.
    7. Omid Zamani & Thomas Bittmann & Jens‐Peter Loy, 2024. "Does the internet bring food prices closer together? Exploring search engine query data in Iran," Journal of Agricultural Economics, Wiley Blackwell, vol. 75(2), pages 688-715, June.
    8. Vladimir Yankov, 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.).
    9. Jason R. Blevins & Garrett T. Senney, 2019. "Dynamic selection and distributional bounds on search costs in dynamic unit‐demand models," Quantitative Economics, Econometric Society, vol. 10(3), pages 891-929, July.
    10. 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.
    11. Atayev, Atabek, 2022. "Uncertain product availability in search markets," Journal of Economic Theory, Elsevier, vol. 204(C).
    12. Atabek Atayev, 2021. "Uncertain Product Availability in Search Markets," Papers 2109.15211, arXiv.org.
    13. Xulia González & Daniel Miles-Touya, 2018. "Price dispersion, chain heterogeneity, and search in online grocery markets," SERIEs: Journal of the Spanish Economic Association, Springer;Spanish Economic Association, vol. 9(1), pages 115-139, March.
    14. Atayev, Atabek, 2021. "Uncertain product availability in search markets," ZEW Discussion Papers 21-089, ZEW - Leibniz Centre for European Economic Research.

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    More about this item

    Keywords

    nonsequential search; oligopoly; arbitrary search cost distributions;
    All these keywords.

    JEL classification:

    • 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
    • C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games

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