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Firms' Strategies For Reducing The Effectiveness Of Consumer Price Search

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  • Ireland, Norman J

    (Department of Economics, University of Warwick)

Abstract

This paper considers a simple model of competition based on some buyers making price comparisons between two suppliers. The difficulties of making appropriate comparisons are made greater by exclusive dealer agreements and restrictions, and by suppliers trading under more than one name. It is argued that suppliers will set prices using mixed strategies, and that prices become less competitive as price comparisons become more difficult. The implications for competition policy are considered in the light of recent judgements of the UK’s Office of Fair Trading and the European Court of Justice.

Suggested Citation

  • Ireland, Norman J, 2002. "Firms' Strategies For Reducing The Effectiveness Of Consumer Price Search," The Warwick Economics Research Paper Series (TWERPS) 627, University of Warwick, Department of Economics.
    • Handle: RePEc:wrk:warwec:627
    as

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    File URL: https://warwick.ac.uk/fac/soc/economics/research/workingpapers/2008/twerp627.pdf
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    References listed on IDEAS

    as
    1. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    2. Ireland, Norman J, 1993. "The Provision of Information in a Bertrand Oligopoly," Journal of Industrial Economics, Wiley Blackwell, vol. 41(1), pages 61-76, March.
    3. Arnold, Michael A, 2000. "Costly Search, Capacity Constraints, and Bertrand Equilibrium Price Dispersion," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 41(1), pages 117-131, February.
    4. Morten Hviid & Greg Shaffer, 1999. "Hassle Costs: The Achilles' Heel of Price‐Matching Guarantees," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 8(4), pages 489-521, December.
    5. Gabszewicz, Jean J. & Garella, Paolo, 1986. "Subjective price search and price competition," International Journal of Industrial Organization, Elsevier, vol. 4(3), pages 305-316, September.
    6. Louis L. Wilde & Alan Schwartz, 1979. "Equilibrium Comparison Shopping," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 46(3), pages 543-553.
    7. Steven Salop & Joseph Stiglitz, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 44(3), pages 493-510.
    8. John W. Pratt & David A. Wise & Richard Zeckhauser, 1979. "Price Differences in almost Competitive Markets," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 93(2), pages 189-211.
    Full references (including those not matched with items on IDEAS)

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