Price Dispersion: An Evolutionary Approach

Ed Hopkins and Robert M. Seymour

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: In many markets it is possible to find rival sellers charging different prices for the same good. Earlier research has explained this phenomenon by demonstrating the existence of dispersed price equilibria when consumers must make use of costly search to discover prices. Taking as a starting point the model of Burdett and Judd (Econometrica, 1983), this paper, extending evolutionary techniques to a game with non-linear payoffs and a continuum of strategies, re-examines the question of price dispersion from an evolutionary, disequilibrium perspective. That is, firms and consumers adjust behaviour adaptively in response to current market conditions. We find that dispersed price equilibria are unstable when consumers use a fixed sample size search rule but may be stable when a reservation price rule is used.

JEL-codes: C72 D43 D82 D83 (search for similar items in EconPapers)
Pages: 6
Date: 1996-02
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://www.econ.ed.ac.uk/papers/id1_esedps.pdf

Related works:
Working Paper: Price Dispersion: An Evolutionary Approach
Working Paper: Price Dispersion: An Evolutionary Approach
Working Paper: Price Dispersion: an Evolutionary Approach
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:1

Access Statistics for this paper

More papers in Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh 31 Buccleuch Place, EH8 9JT, Edinburgh. Contact information at EDIRC.
Bibliographic data for series maintained by Research Office ().