Antitrust & Competition Policy Blog

Editor: D. Daniel Sokol
University of Florida
Levin College of Law

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Thursday, December 10, 2009

On Polarized Prices and Costly Sequential Search

Posted by D. Daniel Sokol

Ruth G. Gilgenbach (SMU - Econ) writes On Polarized Prices and Costly Sequential Search.

ABSTRACT: This paper presents a homogenous goods duopoly model of costly sequential consumer search with three classes of consumers: costless searchers; moderately costly searchers; and consumers for whom search costs are extremely high--higher than the value they attach to the good. Under certain conditions, the mixed-strategy Nash equilibrium price distribution is one where low and high, but never moderate, prices are charged. In equilibrium, free searchers will always search for both prices, very costly searchers

http://lawprofessors.typepad.com/antitrustprof_blog/2009/12/on-polarized-prices-and-costly-sequential-search.html

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