Asymmetric Sequential Search
22 Pages Posted: 9 Jun 2010 Last revised: 22 Jun 2016
Date Written: September 16, 2013
This note explores asymmetries in the way consumers sample prices in a simple variation of Stahl's (1989) seminal model of sequential search. In the note, we characterize a unique equilibrium in which a firm that caters to more local consumers selects prices from a distribution which first order stochastically dominates that of its rival and contains mass at the upper bound of firm price distributions. Both firms exhibit higher prices as the proportion of consumers local to one firm rises, though surprisingly, at the limit, the Diamond paradox may not manifest.
Keywords: Sequential Consumer Search, Oligopoly, Price Dispersion
JEL Classification: D43, D83, L13
Suggested Citation: Suggested Citation