Search, Information, and Prices

Dirk Bergemann, Benjamin Brooks and Stephen Morris

Journal of Political Economy, 2021, vol. 129, issue 8, 2275 - 2319

Abstract: Consider a market with identical firms offering a homogeneous good. For any given ex ante distribution of the price count (the number of firms from which a consumer obtains a quote), we derive a tight upper bound on the equilibrium distribution of sales prices. The bound holds across all models of firms’ common-prior higher-order beliefs about the price count, including the extreme cases of full information and no information. One implication of our results is that a small ex ante probability that the price count is equal to one can lead to a large increase in the expected price. The bound also applies in a large class of models where the price count distribution is endogenously determined.

Date: 2021
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Related works:
Working Paper: Search, Information, and Prices (2020)
Working Paper: Search, Information and Prices (2020)
Working Paper: Search, Information, and Prices (2020)
Working Paper: Search, Information, and Prices (2020)
Working Paper: Search, Information, and Prices (2020)
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