A search model where consumers choose quantity based on expected price

A search model where consumers choose quantity based on expected price

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Article ID: iaor20042242
Country: United Kingdom
Volume: 51
Issue: 4
Start Page Number: 427
End Page Number: 432
Publication Date: Dec 2003
Journal: Journal of Industrial Economics
Authors:
Keywords: search
Abstract:

I describe a price game in which consumers face search costs and base their quantity decision on the expected price. Because of search costs, the choice of the firm they will buy from is described by a random process. I show that the expected equilibrium price is above the monopoly price. This result does not change if demand comes from a small share of perfectly informed consumers with zero search costs.

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