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Search and Bidding Costs

Author

Listed:
  • Miao Chun-Hui

    (Department of Economics, University of South Carolina, 1014 Greene St., Columbia, SC 29208, USA)

Abstract

This paper studies consumer search behavior in markets where sellers must incur fixed costs to win a contract. We show that consumers face a commitment problem if their search intensities are not observed by sellers. Welfare is maximized when consumers can precommit to a limited number of searches, but in the absence of the ability to commit, consumers search more than the optimum. A decline in search costs can exacerbate the commitment problem and leave consumers potentially worse off.

Suggested Citation

  • Miao Chun-Hui, 2020. "Search and Bidding Costs," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 20(2), pages 1-7, April.
    • Handle: RePEc:bpj:bejeap:v:20:y:2020:i:2:p:7:n:8
    DOI: 10.1515/bejeap-2019-0143
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    References listed on IDEAS

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    More about this item

    Keywords

    Bertrand competition; bidding cost; price dispersion; search cost;
    All these keywords.

    JEL classification:

    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • L00 - Industrial Organization - - General - - - General

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