The Stability of Price Dispersion under Seller and Consumer Learning

Ed Hopkins and Robert M Seymour

Edinburgh School of Economics Discussion Paper Series from Edinburgh School of Economics, University of Edinburgh

Abstract: In many markets it is possible to find rival sellers charging different prices for the same good. Earlier research has attempted to explain this phenomenon by demonstrating the existence of dispersed price equilibria when consumers must make use of costly search to discover prices. We ask whether such equilibria can be learnt when sellers adjust prices adaptively in response to current market conditions. With consumer behaviour fixed, convergence to a dispersed price equilibrium is possible in some cases. However, once consumer learning is introduced, the monopoly outcome first found by Diamond (1971) is the only stable equilibrium.

Keywords: learning; evolution; search; price dispersion (search for similar items in EconPapers)
JEL-codes: C72 D83 (search for similar items in EconPapers)
Pages: 36
Date: 2000-12, Revised 2000-12
New Economics Papers: this item is included in nep-com and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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http://www.econ.ed.ac.uk/papers/id52_esedps.pdf Revised version, December 2000 (application/pdf)

Related works:
Journal Article: The Stability of Price Dispersion under Seller and Consumer Learning (2002)
Working Paper: The Stability of Price Dispersion under Seller and Consumer Learning (2002)
Working Paper: The Stability of Price Dispersion under Seller and Consumer Learning (2000)
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Persistent link: https://EconPapers.repec.org/RePEc:edn:esedps:52

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