Search and Information Costs

Chun-Hui Miao

MPRA Paper from University Library of Munich, Germany

Abstract: In many markets, consumers obtain price quotes before making purchases. In this paper, I consider a fixed-sample size model of search for price quotes when sellers must spend resources to learn the true cost of providing goods/services. I find that (1) even with ex ante identical and rational consumers and sellers, there is price dispersion in the equilibrium; (2) the expected equilibrium price can decrease with the search cost of consumers; (3) consumers may engage in excessive search that is detrimental to their own welfare; (4) a decline in the search cost can leave consumers worse off, due to their lack of commitment.

Keywords: Price dispersion; Precontract cost; Search cost; Sealed-bid Auction. (search for similar items in EconPapers)
JEL-codes: D4 D40 L0 (search for similar items in EconPapers)
Date: 2017-06-30
New Economics Papers: this item is included in nep-com and nep-gth
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https://mpra.ub.uni-muenchen.de/83689/1/MPRA_paper_83689.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/84442/1/MPRA_paper_84442.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/87102/8/MPRA_paper_87102.pdf revised version (application/pdf)

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