Simultaneous Search for Differentiated Products: The Impact of Search Costs and Firm Prominence

Moraga-González, José-Luis, Sándor, Zsolt and Matthijs Wildenbeest
Authors registered in the RePEc Author Service: Jose Luis Moraga-Gonzalez

No 14454, CEPR Discussion Papers from Centre for Economic Policy Research

Abstract: This paper extends the literature on simultaneous search by allowing for differentiated products and consumer search cost heterogeneity. In a duopolistic market, consumers with sufficiently low search costs choose to inspect the products of the two firms and purchase, if any, the most suitable; consumers with higher search costs choose to examine just one of the products; consumers with prohibitively high search costs do not check any of the products and drop out of the market altogether. We show conditions under which a symmetric price equilibrium always exists. We provide a necessary and sufficient condition on the search cost distribution under which an increase in the costs of search of all consumers may result in a lower, equal or higher equilibrium price. We extend this analysis to the case with more than two firms. The effects of prominence on equilibrium prices are also studied. The prominent firm charges a higher price than the non-prominent firm and both their prices are below the symmetric equilibrium price. Consequently, with simultaneous search, market prominence increases the surplus of consumers.

Keywords: Non-sequential search; Simultaneous search; Oligopoly; Search cost heterogeneity; Differentiated products; Non-uniform sampling; Prominence (search for similar items in EconPapers)
JEL-codes: C72 D43 (search for similar items in EconPapers)
Date: 2020-02
New Economics Papers: this item is included in nep-com, nep-mic and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Journal Article: Simultaneous Search for Differentiated Products: The Impact of Search Costs and Firm Prominence (2021)
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