Non-Reservation Price Equilibria and Search Without Priors

Author(s)
Anton Sobolev, Alexei Parakhonyak
Abstract

We analyse a model of oligopolistic competition in which consumers search without priors. Consumers do not have prior beliefs about the distribution of prices charged by firms and thus try to use a robust search procedure. We show that the optimal stopping rule is stochastic and that for any distribution of search costs there is a unique market equilibrium which is characterised by price dispersion. Although listed prices approach the monopoly price as the number of firms increases, the effective price paid by consumers does not depend on the number of firms.

Organisation(s)
Department of Economics
External organisation(s)
National Research University
Journal
The Economic Journal
Volume
125
Pages
887-909
No. of pages
23
ISSN
0013-0133
DOI
https://doi.org/10.1111/ecoj.12265
Publication date
05-2015
Peer reviewed
Yes
Austrian Fields of Science 2012
502013 Industrial economics, 502047 Economic theory, 502021 Microeconomics
Keywords
ASJC Scopus subject areas
Economics and Econometrics
Portal url
https://ucrisportal.univie.ac.at/en/publications/nonreservation-price-equilibria-and-search-without-priors(336a0b95-7765-473a-94d9-9453416913ae).html