Antitrust & Competition Policy Blog

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

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

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