Can a decline in search cost increase prices?

Ruth G. Gilgenbach

Canadian Journal of Economics, 2015, vol. 48, issue 4, 1381-1402

Abstract: This paper provides a new explanation of why a decline in consumers price search cost may not lead to lower prices. In a duopoly with price competition, I show that when some consumers are captive to one firm, there may be a non-monotonic relationship between search cost and market power; firms may charge high prices with higher probability and the average price charged may be higher when consumers price search cost falls below a critical level. Furthermore, when firms have asymmetric captive segments, expected prices charged by each firm may move in opposite directions as search cost declines.

JEL-codes: D83 (search for similar items in EconPapers)
Date: 2015
References: Add references at CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1111/caje.12147 (text/html)
access restricted to subscribers

Related works:
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:cje:issued:v:48:y:2015:i:4:p:1381-1402

Ordering information: This journal article can be ordered from
https://www.economic ... ionen/membership.php

Access Statistics for this article

Canadian Journal of Economics is currently edited by Zhiqi Chen

More articles in Canadian Journal of Economics from Canadian Economics Association Canadian Economics Association Prof. Werrner Antweiler, Treasurer UBC Sauder School of Business 2053 Main Mall Vancouver, BC, V6T 1Z2. Contact information at EDIRC.
Bibliographic data for series maintained by Prof. Werner Antweiler ().