A Search Model Where Consumers Choose Quantity Based on Expected Price

Paolo Buccirossi

Journal of Industrial Economics, 2003, vol. 51, issue 4, 427-432

Abstract: I describe a price game in which consumers face search costs and base their quantity decision on the expected price. Because of search costs, the choice of the firm they will buy from is described by a random process. I show that the expected equilibrium price is above the monopoly price. This result does not change if demand comes from a small share of perfectly informed consumers with zero search costs.

Date: 2003
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https://doi.org/10.1111/j.0022-1821.2003.00208.x

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