Dynamic Price Dispersion in a Bertrand-Edgeworth Model
This paper considers a dynamic model of price competition in which sellers are endowed with one unit of the good and compete by posting prices in every period. Buyers each demand one unit of the good and have a common reservation price. They have full information regarding the prices posted by each firm in the market; hence, search is costless. The number of buyers coming to the market in each period is random. We characterize the dynamics of market prices and show that price dispersion persists over time.
|Date of creation:||Oct 2005|
|Date of revision:||Dec 2007|
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