Non-reservation price equilibria and consumer search
- Author(s)
- Maarten Janssen, Alexei N. Parakhonyak, Anastasia Parakhonyak
- Abstract
Reservation price equilibria (RPE) do not accurately assess market power in consumer search markets. In most search markets, consumers do not know important elements of the environment in which they search (such as, for example, firms' cost). We argue that when consumers learn when searching, RPE suffer from theoretical issues, such as non-existence and critical dependence on specific out-of-equilibrium beliefs. We characterize equilibria where consumers rationally choose search strategies that are not characterized by a reservation price. Non-RPE always exist and do not depend on specific out-of-equilibrium beliefs. Non-RPE have active consumer search and are consistent with recent empirical findings.
- Organisation(s)
- Department of Economics
- External organisation(s)
- University of Oxford, Université Toulouse-I-Capitole
- Journal
- Journal of Economic Theory
- Volume
- 172
- Pages
- 120 - 162
- No. of pages
- 43
- ISSN
- 0022-0531
- DOI
- https://doi.org/10.1016/j.jet.2017.08.003
- Publication date
- 11-2017
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502013 Industrial economics
- Keywords
- ASJC Scopus subject areas
- Economics and Econometrics
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/nonreservation-price-equilibria-and-consumer-search(80fec2bd-9020-4dcd-9ed9-96327b17e7a8).html