Nonsequential Search Equilibrium with Search Cost Heterogeneity
20 Pages
Posted: 10 Sep 2010
VU University Amsterdam; University of Groningen
University of Groningen
Indiana University - Kelley School of Business - Department of Business Economics & Public Policy
Date Written: July 1, 2010
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.
Keywords: nonsequential search, oligopoly, arbitrary search cost distributions
JEL Classification: D43, C72
Suggested Citation:
Suggested Citation
Moraga-González, José L. and Sandor, Zsolt and Wildenbeest, Matthijs R., Nonsequential Search Equilibrium with Search Cost Heterogeneity (July 1, 2010). IESE Business School Working Paper No. 869. Available at SSRN: https://ssrn.com/abstract=1674376 or http://dx.doi.org/10.2139/ssrn.1674376
