A SEARCH MODEL WHERE CONSUMERS CHOOSE QUANTITY BASED ON EXPECTATED PRICE

A SEARCH MODEL WHERE CONSUMERS CHOOSE QUANTITY BASED ON EXPECTATED PRICE

I describe a price game in which consumers face search costs and base their quantity decision on the expected price. Because of search costs, the choice of the firm they will buy from is described by a random process. I shown that the expected equilibrium price is above the monopoly price. This resu...

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Bibliographic Details
Published in:The Journal of industrial economics Vol. 51; no. 4; p. 427
Main Author: Buccirossi, Paolo
Format: Journal Article
Language:English
Published: Oxford Blackwell Publishing Ltd 01-12-2003
Subjects:
Costs
Economic theory
Game theory
Prices
Studies
Online Access:Get full text
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Summary:I describe a price game in which consumers face search costs and base their quantity decision on the expected price. Because of search costs, the choice of the firm they will buy from is described by a random process. I shown that the expected equilibrium price is above the monopoly price. This result does not change if demand comes form a small share of perfectly informed consumers with zero search costs. [PUBLICATION ABSTRACT]
ISSN:0022-1821
1467-6451