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Price dispersion in a directed search model

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  • Ce Huang

Abstract

This paper investigates a directed search model in which some buyers are uninformed about prices. We find that sellers' strategies are given by discrete distributions in any symmetric pricing equilibrium. When the proportion of uninformed buyers is sufficiently high, the unique symmetric pricing equilibrium involves a countably infinite number of atoms. Dispersion de prix dans un modèle de recherche dirigée. Ce papier étudie un modèle de recherche dirigée dans lequel certains acheteurs sont mal informés sur les prix. Nous trouvons que les stratégies des vendeurs sont données par les distributions discrètes dans tout equilibre de prix symmétrique. Quand la proportion des acheteurs qui ne connaissent pas les prix est suffisament élevée, le seul equilibre de prix symmétrique concerne un nombre dénombrable infini des atomes.

Suggested Citation

  • Ce Huang, 2016. "Price dispersion in a directed search model," Canadian Journal of Economics/Revue canadienne d'économique, John Wiley & Sons, vol. 49(3), pages 1208-1223, August.
    • Handle: RePEc:wly:canjec:v:49:y:2016:i:3:p:1208-1223
    DOI: 10.1111/caje.12230
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    References listed on IDEAS

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    1. Varian, Hal R, 1980. "A Model of Sales," American Economic Review, American Economic Association, vol. 70(4), pages 651-659, September.
    2. Athanasios Geromichalos, 2014. "Directed Search And The Bertrand Paradox," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 55, pages 1043-1065, November.
    3. Kenneth Burdett & Shouyong Shi & Randall Wright, 2001. "Pricing and Matching with Frictions," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 1060-1085, October.
    4. Benjamin Lester, 2011. "Information and Prices with Capacity Constraints," American Economic Review, American Economic Association, vol. 101(4), pages 1591-1600, June.
    5. Peters, Michael, 1984. "Bertrand Equilibrium with Capacity Constraints and Restricted Mobility," Econometrica, Econometric Society, vol. 52(5), pages 1117-1127, September.
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    Cited by:

    1. Kircher, Philipp & Wright, Randall & Julien, Benoit & Guerrieri, Veronica, 2017. "Directed Search: A Guided Tour," CEPR Discussion Papers 12315, C.E.P.R. Discussion Papers.

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