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Dynamic Price Dispersion in a Bertrand-Edgeworth Model

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  • Sun, Ching-jen

Abstract

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.

Suggested Citation

  • Sun, Ching-jen, 2005. "Dynamic Price Dispersion in a Bertrand-Edgeworth Model," MPRA Paper 9854, University Library of Munich, Germany, revised Dec 2007.
    • Handle: RePEc:pra:mprapa:9854
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    File URL: https://mpra.ub.uni-muenchen.de/9854/1/MPRA_paper_9854.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Price Dispersion; Search Cost; Bertrand-Edgeworth Model;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection

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