The Stability of Price Dispersion under Seller and Consumer Learning

Ed Hopkins and Roberty M. Seymour
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Roberty M. Seymour: University College, London

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Abstract: In many markets it is possible to find rival sellers charging different prices for the same good. Earlier research has attempted to explain this phenomenon by demonstrating the existence of dispersed price equilibria when consumers must make use of costly search to discover prices. We ask whether such equilibria can be learnt when sellers adjust prices adaptively in response to current market conditions. With consumer behaviour fixed, convergence to a dispersed price equilibrium is possible in some cases. However, once consumer learning is introduced, the monopoly outcome first found by Diamond (1971) is the only stable equilibrium.

Keywords: Learning; Evolution; Search; Price Dispersion (search for similar items in EconPapers)
JEL-codes: C72 D83 (search for similar items in EconPapers)
Date: 2002-03-04
Note: Type of Document - pdf; prepared on PC; pages: 36; figures: included
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http://129.3.20.41/eps/game/papers/0203/0203002.pdf (application/pdf)

Related works:
Working Paper: The Stability of Price Dispersion under Seller and Consumer Learning (2004)
Journal Article: The Stability of Price Dispersion under Seller and Consumer Learning (2002)
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Persistent link: http://EconPapers.repec.org/RePEc:wpa:wuwpga:0203002

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