Non-Reservation Price Equilibria and Search Without Priors
- Author(s)
- Anton Sobolev, Alexei Parakhonyak
- Abstract
In this paper 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: they minimize the loss relative to the searcher, who knows the price distribution, in the worst case scenario. 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 characterized 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. We show that prices in our model are lower than those in a model where consumers know the distribution of prices.- Organisation(s)
- Department of Economics
- External organisation(s)
- National Research University
- Journal
- The Economic Journal
- Volume
- 125
- Pages
- 887-909
- ISSN
- 0013-0133
- DOI
- https://doi.org/10.1111/ecoj.12265
- Publication date
- 05-2015
- Peer reviewed
- Yes
- Austrian Fields of Science 2012
- 502021 Microeconomics, 502047 Economic theory, 502013 Industrial economics
- Keywords
- Portal url
- https://ucris.univie.ac.at/portal/en/publications/nonreservation-price-equilibria-and-search-without-priors(336a0b95-7765-473a-94d9-9453416913ae).html