Poisson Price Dispersion

21 Pages Posted: 8 Aug 2005

See all articles by Yoram Halevy

Yoram Halevy

University of Toronto

Igal Milchtaich

Bar-Ilan University - Department of Economics

Date Written: February 16, 2005

Abstract

We study a competitive market for a homogeneous good, in which the only uncertainty concerns the number of identical sellers, who are sampled by a finite Poisson process from a continuum of potential participants. It is shown that, in equilibrium, there is price dispersion. Specifically, prices conform to a Poisson process on an interval, which is a proper subset of that between the sellers' cost and the buyers' reservation price. Although prices arbitrarily close to the latter may occur in equilibrium, they are less frequent than prices at the lower end of the pricing interval.

Keywords: Random-player games, Poisson games, Uncertain number of sellers, Directed search.

JEL Classification: C7, D4, D8, L1

Suggested Citation

Halevy, Yoram and Milchtaich, Igal, Poisson Price Dispersion (February 16, 2005). Available at SSRN: https://ssrn.com/abstract=770969 or http://dx.doi.org/10.2139/ssrn.770969

Yoram Halevy (Contact Author)

University of Toronto ( email )

150 St. George Street
Toronto, Ontario M5S3G7
Canada

Igal Milchtaich

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel

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