A Theory of Stable Price Dispersion

David Myatt
Authors registered in the RePEc Author Service: David Ronayne

No 873, Economics Series Working Papers from University of Oxford, Department of Economics

Abstract: We propose a two-stage replacement for established “clearinghouse" or “captive and shopper" pricing models: second-stage retail prices are constrained by first-stage list prices. In contrast to the mixed-strategy equilibria of single-stage games, a unique profile of distinct prices is supported by the play of pure strategies along the equilibrium path, and so we predict stable price dispersion. We find novel results in applications to models of sales, product prominence, advertising, and consumer search.

Keywords: price dispersion; clearinghouse models; prominence; advertising; buyer search (search for similar items in EconPapers)
Date: 2019-10-29
New Economics Papers: this item is included in nep-com and nep-gth
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Citations: View citations in EconPapers (24)

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