Economics at your fingertips  

Instability of endogenous price dispersion equilibria: A simulation

Lucas Herrenbrueck

Canadian Journal of Economics, 2018, vol. 51, issue 4, 1363-1385

Abstract: Models of price posting by firms and search by consumers (such as Burdett and Judd 1983), often feature equilibria with endogenous price dispersion. However, such equilibria are strategically fragile. In order to investigate how robust they are in the absence of an external coordination mechanism, I simulate various protocols firms may use to update their prices. Despite firms being myopic, some protocols yield results close to the benchmark model. If firms rush to update before observing competitors actions, profits are higher on average but volatile and cyclical. With cost dispersion, prices become more stable as they are more closely tied to costs. All results are robust to moderate menu costs.

JEL-codes: D21 (search for similar items in EconPapers)
Date: 2018
References: Add references at CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (text/html)
access restricted to subscribers

Related works:
Journal Article: Instability of endogenous price dispersion equilibria: A simulation (2018) Downloads
Working Paper: Instability of Endogenous Price Dispersion Equilibria: A Simulation (2015) Downloads
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:

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 Katherine Cuff

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 ().

Page updated 2022-08-03
Handle: RePEc:cje:issued:v:51:y:2018:i:4:p:1363-1385