Prices and heterogeneous search costs

J.L. Moraga Gonzalez, Z. Sandor, M.R. Wildenbeest

Research output: Contribution to JournalArticleAcademicpeer-review

Abstract

We study price formation in a model of consumer search for differentiated products in which consumers have heterogeneous search costs. We provide conditions under which a pure-strategy symmetric Nash equilibrium exists and is unique. Search costs affect two margins—the intensive search margin (or search intensity) and the extensive search margin (or the decision to search rather than to not search at all). These two margins affect the elasticity of demand in opposite directions and whether lower search costs result in higher or lower prices depends on the properties of the search cost density.
LanguageEnglish
Pages125-146
JournalRand Journal of Economics
Volume48
Issue number1
DOIs
Publication statusPublished - 2017

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Margin
Search costs
Differentiated products
Elasticity of demand
Consumer search
Search intensity
Price formation
Pure strategies
Nash equilibrium

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Moraga Gonzalez, J.L. ; Sandor, Z. ; Wildenbeest, M.R. / Prices and heterogeneous search costs. In: Rand Journal of Economics. 2017 ; Vol. 48, No. 1. pp. 125-146.
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Prices and heterogeneous search costs. / Moraga Gonzalez, J.L.; Sandor, Z.; Wildenbeest, M.R.

In: Rand Journal of Economics, Vol. 48, No. 1, 2017, p. 125-146.

Research output: Contribution to JournalArticleAcademicpeer-review

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