Search and Bidding Costs

Miao Chun-Hui ()
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Miao Chun-Hui: Department of Economics, University of South Carolina, 1014 Greene St., Columbia, SC 29208, USA

The B.E. Journal of Economic Analysis & Policy, 2020, vol. 20, issue 2, 7

Abstract: This paper studies consumer search behavior in markets where sellers must incur fixed costs to win a contract. We show that consumers face a commitment problem if their search intensities are not observed by sellers. Welfare is maximized when consumers can precommit to a limited number of searches, but in the absence of the ability to commit, consumers search more than the optimum. A decline in search costs can exacerbate the commitment problem and leave consumers potentially worse off.

Keywords: Bertrand competition; bidding cost; price dispersion; search cost (search for similar items in EconPapers)
JEL-codes: D40 L00 (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1515/bejeap-2019-0143

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