Price Equilibrium with Selling Constraints

Moraga-González, José-Luis and Makoto Watanabe
Authors registered in the RePEc Author Service: Jose Luis Moraga-Gonzalez

No 14718, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper studies how selling constraints, which refer to the inability of firms to attend to all the buyers who want to inspect their products, affect the efficiency of competitive search equilibrium. Selling constraints matter because buyers have heterogeneous valuations that they only discover upon inspecting the product. As a result, raising the price increases the likelihood of buyers matching, but decreases their expected utility conditional on a match. We show that the equilibrium price is inefficiently high except in the (arguably unrealistic) limit where firms’ selling constraints vanish.

Keywords: market; power (search for similar items in EconPapers)
JEL-codes: D4 J6 L1 L8 R3 (search for similar items in EconPapers)
Date: 2020-05
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Price Equilibrium with Selling Constraints (2023)
Working Paper: Price equilibrium with selling constraints (2023)
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