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Poisson Price Dispersion

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  • Halevy, Yoram
  • Michtaich, Igal

Abstract

We study a competitive market for a homogeneous good, in which the only uncertainty concerns the number of identical sellers, who are sampled by a finite Poisson process from a continuum of potential participants. It is shown that, in equilibrium, there is price dispersion. Specifically, prices conform to a Poisson process on an interval, which is a proper subset of that between the sellers' cost and the buyers' reservation price. Although prices arbitrarily close to the latter may occur in equilibrium, they are less frequent than prices at the lower end of the pricing interval.

Suggested Citation

  • Halevy, Yoram & Michtaich, Igal, 2005. "Poisson Price Dispersion," Microeconomics.ca working papers halevy-05-07-26-12-10-45, Vancouver School of Economics, revised 25 Feb 2014.
  • Handle: RePEc:ubc:pmicro:halevy-05-07-26-12-10-45
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    File URL: http://faculty.arts.ubc.ca/yhalevy/poisson.pdf
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    References listed on IDEAS

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

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    More about this item

    Keywords

    Random-player games; Poisson games; Uncertain number of sellers; Directed search.;
    All these keywords.

    JEL classification:

    • C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
    • D4 - Microeconomics - - Market Structure, Pricing, and Design
    • D8 - Microeconomics - - Information, Knowledge, and Uncertainty
    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance

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