Price dispersion
(2003)
Files
dp2003-32FIG.pdf
Open Access - Adobe PDF
- 155.57 KB
Details
- Authors
- Abstract
- We model firm pricing given consumers follow simple reservation price rules. Such reservation rules are rational when consumers are sufficiently impatient. The equilibrium exhibits price dispersion in pure strategies, with lower price firms earning higher profits. The range of price dispersion increases with the number of firms: the highest price is the monopoly one, while the lowest price tends to marginal cost. The average transaction price remains substantially above marginal cost even in the limit. Introducing shoppers may increase market prices. Finally, we show that equilibrium prices become less dispersed as consumers become more patient.
- Affiliations
Citations
Anderson, S. P., & de Palma, A. (2003). Price dispersion (ECON Discussion Papers 2003/29). https://hdl.handle.net/2078.5/33254