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Nonsequential Search Equilibrium with Search Cost Heterogeneity

Listed author(s):
  • 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)

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.

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File URL: http://kelley.iu.edu/riharbau/RePEc/iuk/wpaper/bepp2010-11-moraga-sandor-wildenbeest.pdf
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Paper provided by Indiana University, Kelley School of Business, Department of Business Economics and Public Policy in its series Working Papers with number 2010-11.

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Date of creation: Jun 2010
Handle: RePEc:iuk:wpaper:2010-11
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  8. Seade, Jesus K, 1980. "On the Effects of Entry," Econometrica, Econometric Society, vol. 48(2), pages 479-489, March.
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  21. José Luis Moraga‐González & Zsolt Sándor & Matthijs R. Wildenbeest, 2013. "Semi‐Nonparametric Estimation Of Consumer Search Costs," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 28(7), pages 1205-1223, November.
  22. McAfee R. Preston, 1995. "Multiproduct Equilibrium Price Dispersion," Journal of Economic Theory, Elsevier, vol. 67(1), pages 83-105, October.
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  24. Burdett, Kenneth & Mortensen, Dale T, 1998. "Wage Differentials, Employer Size, and Unemployment," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 39(2), pages 257-273, May.
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