Nonsequential Search Equilibrium with Search Cost Heterogeneity

Abstract:     
We generalize the model of Burdett and Judd (1983) to the case where an arbitrary finite number of firms sells a homogeneous good to buyers who have heterogeneous search costs. We show that a price dispersed symmetric Nash equilibrium always exists. Numerical results show that the behavior of prices with respect to the number of firms hinges upon the shape of the search cost distribution: when search costs are relatively concentrated (dispersed), entry of firms leads to higher (lower) average prices.

Number of Pages in PDF File: 20

Keywords: nonsequential search, oligopoly, arbitrary search cost distributions

JEL Classification: D43, C72

working papers series