Dynamic Price Dispersion in a Bertrand-Edgeworth Model

Ching-jen Sun

MPRA Paper from University Library of Munich, Germany

Abstract: This paper considers a dynamic model of price competition in which sellers are endowed with one unit of the good and compete by posting prices in every period. Buyers each demand one unit of the good and have a common reservation price. They have full information regarding the prices posted by each firm in the market; hence, search is costless. The number of buyers coming to the market in each period is random. We characterize the dynamics of market prices and show that price dispersion persists over time.

Keywords: Price Dispersion; Search Cost; Bertrand-Edgeworth Model (search for similar items in EconPapers)
JEL-codes: D43 L11 (search for similar items in EconPapers)
Date: 2005-10, Revised 2007-12
New Economics Papers: this item is included in nep-com and nep-mic
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:9854

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