A theory of search with deadlines and uncertain recall
Serife Akin and
Brennan Platt
Economic Theory, 2014, vol. 55, issue 1, 133 pages
Abstract:
We ask how the ability to recall past prices affects the dynamics of search and price formation. In the model, buyers have limited time to purchase a good and face uncertainty regarding the availability of past price quotes in the future. Sellers cannot observe a potential buyer’s remaining time until deadline nor her quote history, and hence post prices that weigh the probability of sale versus the profit once sold. We find that, in contrast to conventional wisdom, reducing the consumer’s recall ability may actually improve his expected utility because it lowers the average expected price in the market and reduces the duration of search. Copyright Springer-Verlag Berlin Heidelberg 2014
Keywords: Equilibrium search; Uncertain recall; Deadlines; Price posting; Reservation prices; D40; D83 (search for similar items in EconPapers)
Date: 2014
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Working Paper: A theory of search with deadlines and uncertain recall (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:spr:joecth:v:55:y:2014:i:1:p:101-133
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DOI: 10.1007/s00199-013-0740-8
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