 Sequentially mixed search and equilibrium price dispersionShouyong Shi Journal of Economic Theory, 2023, vol. 213, issue C Abstract: Many markets feature sequentially mixed search (SMS), which is search directed toward a price distribution followed by noisy matching with multiple offers. I construct a tractable model of SMS, establish existence of a unique equilibrium, and prove that the equilibrium is constrained efficient. Although individuals on each side of the market are homogeneous and search is directed, the equilibrium has a non-degenerate and continuous distribution of posted prices on a connected support. Despite the possibility of multiple offers, the highest price is lower than the joint value of a match so that both sides of the market obtain strictly positive surpluses of trade at all equilibrium prices. This feature captures the common practice that searchers restrict search below a price bound. Moreover, I show that an increase in the meeting efficiency widens price dispersion, which helps explain the puzzling fact that the increased use of the Internet has not reduced price dispersion. Keywords: Sequentially mixed search; Price dispersion; Efficiency (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jetheo:v:213:y:2023:i:c:s002205312300131x DOI: 10.1016/j.jet.2023.105735 Access Statistics for this article Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell More articles in Journal of Economic Theory from Elsevier |
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