Dynamic Pricing with Search Frictions

41 Pages Posted: 27 Jan 2018

Multiple version iconThere are 2 versions of this paper

Date Written: December 05, 2017

Abstract

We study markets for perishable goods with search frictions. Sellers have a single unit of a good and post prices in every period. Buyers engage in costly search to observe prices and match values. In equilibrium trade starts endogenously and the volume of trade increases over time. Under mild conditions, prices decrease at increasing rates over time. We derive the gains from trade in equilibrium as well as their distribution, and fully characterize the equilibrium for a class of demand functions in markets with evenly matched buyers and sellers. We finally discuss implications for market design, including cancellation policies.

Keywords: consumer search, dynamic pricing, sharing economy

JEL Classification: D110, D830, L130

Suggested Citation

Garcia, Daniel, Dynamic Pricing with Search Frictions (December 05, 2017). CESifo Working Paper Series No. 6765, Available at SSRN: https://ssrn.com/abstract=3109253 or http://dx.doi.org/10.2139/ssrn.3109253

Daniel Garcia (Contact Author)

University of Vienna ( email )

Bruenner Strasse 72
Vienna, Vienna 1090
Austria

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