CESifo Working Paper No. 1332
A Note on Costly Sequential Search
and Oligopoly Pricing
Abstract
We modify the paper of Stahl (1989) on sequential consumer search in an oligopoly context
by relaxing the assumption that consumers obtain the first price quotation for free. When all
price quotations are costly to obtain, a new equilibrium arises where consumers randomize
between not searching at all and searching for one price. The region of parameters for which
this equilibrium exists becomes larger as the number of shoppers decreases and/or the number
of firms increases. The comparative statics properties of this new equilibrium are interesting.
In particular, the expected price increases as search cost decreases, and is constant in the
number of shoppers and in the number of firms. We show that the Diamond result never
obtains with truly costly search.
JEL Code: C13, D40, D83, L13.
Keywords: sequential consumer search, oligopoly, price dispersion.
Maarten C. W. Janssen
Department of Economics
Erasmus University Rotterdam
P.O. Box 1738
3000 DR Rotterdam
The Netherlands
[email protected]
José Luis Moraga-Gonzalez
Department of Economics
Erasmus University Rotterdam
Office H07-26
P.O. Box 1738
3000 DR Rotterdam
The Netherlands
[email protected]
Matthijs R. Wildenbeest
Department of Economics
Erasmus University Rotterdam
P.O. Box 1738
3000 DR Rotterdam
The Netherlands
[email protected]
More intriguing information
1. Draft of paper published in:2. CREDIT SCORING, LOAN PRICING, AND FARM BUSINESS PERFORMANCE
3. CONSIDERATIONS CONCERNING THE ROLE OF ACCOUNTING AS INFORMATIONAL SYSTEM AND ASSISTANCE OF DECISION
4. DETERMINANTS OF FOOD AWAY FROM HOME AMONG AFRICAN-AMERICANS
5. The name is absent
6. Geography, Health, and Demo-Economic Development
7. The name is absent
8. National urban policy responses in the European Union: Towards a European urban policy?
9. Exchange Rate Uncertainty and Trade Growth - A Comparison of Linear and Nonlinear (Forecasting) Models
10. FASTER TRAINING IN NONLINEAR ICA USING MISEP