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Nonsequential Search Equilibrium with Search Cost Heterogeneity

20 Pages Posted: 10 Sep 2010  

José L. Moraga-González

VU University Amsterdam; University of Groningen

Zsolt Sandor

University of Groningen

Matthijs R. Wildenbeest

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

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

Jose Luis Moraga-Gonzalez (Contact Author)

VU University Amsterdam ( email )

De Boelelaan 1105
1081 HV Amsterdam
Netherlands

HOME PAGE: http://www.tinbergen.nl/~moraga/

University of Groningen

P.O. Box 800
9700 AV Groningen
Netherlands

Zsolt Sandor

University of Groningen ( email )

P.O. Box 800
9700 AH Groningen
Netherlands

Matthijs R. Wildenbeest

Indiana University - Kelley School of Business - Department of Business Economics & Public Policy ( email )

Bloomington, IN 47405
United States
812-856-5067 (Phone)
812-855-3354 (Fax)

HOME PAGE: http://www.kelley.iu.edu/mwildenb

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