Consumer Search with Chain Stores

Kuniavsky, Sergey (11. Februar 2014): Consumer Search with Chain Stores. Münchener Wirtschaftswissenschaftliche Beiträge (VWL) 2014-6

Abstract

The Stahl model is one of the most applied consumer search models, with many applications and an empirical background. The present paper explores an extension where sellers have asymmetries, which is mostly excluded by the literature. Sellers with heterogeneous numbers of stores are introduced, reflecting a typical market structure. As in the original Stahl model, a market consists of several sellers, and consumers, where some face a cost when sequentially searching. The paper shows that no symmetric Nash equilibrium exists in the extension. Additional results suggest that smallest sellers will be the ones offering the lowest prices, in line with several real world examples provided in the paper. However, profits remain in most cases fixed per store, making a larger firm more profitable, yet with lower quantity sold. The findings suggest that on some level price dispersion will still exist, together with some level of price stickiness, both observed in reality.

• Dokumententyp: Paper
• Keywords: Sequential Consumer Search, Oligopoly, Asymmetric NE
• Fakultät: Volkswirtschaft ; Volkswirtschaft > Munich Discussion Papers in Economics
• Themengebiete: 300 Sozialwissenschaften > 330 Wirtschaft
• JEL Classification: D43, D83, L13
• Sprache: Englisch

Literaturliste

Astorne-Figari, C., A. Yankelevich, Asymmetric Sequential Search. Available at SSRN: http://ssrn.com/abstract=1622809

Barron, G., E. Yechiam, The coexistence of overestimation and underweighting of rare events and the contingent recency effect, Judgment and Decision Making, vol. 4(6), 447-460

Baye, M., J. Rupert, J. Gatti, P. Kattuman, J. Morgan, Clicks, Discontinuities and Firm Demand Online, Journal of Economics and Management Strategy vol. 18(4) 935-975

Bakucs L.Z., F. Imre, Milk Retail Sales Patterns in a Traditional Economy. The Case of Hungary. In: 83rd Annual Conference of the Agricultural Eco- nomics Society

Baye, M., D. Kovenock, C. de Vries, It takes two to Tango: Equilibrium in a model of sales, Games and Economic Behavior vol. 4, 493-510

Baye, M., J. Morgan, A folk Theorem in one shot Bertrand Games, Economic Letters vol. 65, 59-65

Burdett, K., K. Judd, Equilibrium Price Dispersion, Econometrica vol. 51, 955-970

Burdett, K., E. Smith, Price Distribution and Competition, Economics Let- ters vol. 106, 180-183

Carlson, J., R. P. McAfee, Discrete Equilibrium Price Dispersion, The Jour- nal of Political Economy, vol. 91(3), 480-493

Chen, Y., T. Zhang, Equilibrium price dispersion with heterogeneous searchers, MPRA paper 18757

Chioveanu, I., J. Zhou, Price Competition and Consumer Confusion, MPRA paper 17340

Davis M.C., J.D. Hamilton, Why are prices sticky? The dynamics of wholesale gasoline prices Working Paper 9741, NBER working papers series,

Diamond, P., A Model of Price Adjustment, Journal of Economic Theory vol. 3, 156-168

Janssen, M., J. Morags-Gonzales, Strategic Pricing, Consumer Search and the Number of Firms, Review of Economic Studies vol. 71, 1089-1118

Janssen, M., J. Moraga-Gonzales, M. Wildenbeest, Consumer Search and Oligopolistic Pricing: an Empiric Investigation, Tinbergen Institute Discussion Papers 04-071/1, Tinbergen Institute

Janssen, M., J. Moraga-Gonzales, M. Wildenbeest, Truly costly sequential search and oligopolistic pricing, International Journal of Industrial Organi- sation vol. 23, 451-466

Janssen, M., A. Parakhonyak, Consumer Search with Costly Recall, Tinbergen Institute Discussion Paper TI-2008-002/1

Janssen, M., P. Pichler, S. Weidenholzer, Sequential Search with Incompletely Informed Consumers: Theory and Evidense form Retail Gasoline Market, Vienna Economics Papers 0914, University of Vienna

Martin, A., J. Saurina, V. Salas, Interest Rate Dispersion in Deposit and Loan Markets, Banco de Espana Working Papers 0506

Rothshild, M., Models of Market Organization with Imperfect Information: A survey, The Journal of Political Economy vol. 81(6), 1283-1308

Stahl, D., Oligopolistic Prices with Sequential Consumer Search, The Amer- ican Economic Review vol. 79, 700-712

Stahl, D., Oligopolistic Pricing with Hetrogeneous consumer search, Inter- national Journal of Indistrial Organisation vol. 14 243-268

Varian, H., A Model of Sales, The American Economic Review vol. 70, 651-659

Watanabe, M., A Model of Merchants, Journal of Economic Theory vol. 145, 1865-1889