We propose a model of price competition where consumers exogenously differ in the number of prices they compare. Our model can be interpreted either as a non–sequential search model or as a network model of price competition. We show that i) if consumers who previously just sampled one firm start to compare more prices all types of consumers will expect to pay a lower price and ii) if consumers who already sampled more than one price sample (even) more prices then there exists a threshold –the informational divide– such that all consumers comparing fewer prices than this threshold will expect to pay a higher price whereas all consumers comparing more prices will expect to pay a lower price than before. Thus increased search can create a negative externality and it is not necessarily beneficial for all consumers.
The Informational Divide
PASINI, Giacomo;
2013-01-01
Abstract
We propose a model of price competition where consumers exogenously differ in the number of prices they compare. Our model can be interpreted either as a non–sequential search model or as a network model of price competition. We show that i) if consumers who previously just sampled one firm start to compare more prices all types of consumers will expect to pay a lower price and ii) if consumers who already sampled more than one price sample (even) more prices then there exists a threshold –the informational divide– such that all consumers comparing fewer prices than this threshold will expect to pay a higher price whereas all consumers comparing more prices will expect to pay a lower price than before. Thus increased search can create a negative externality and it is not necessarily beneficial for all consumers.File | Dimensione | Formato | |
---|---|---|---|
DiDiGames20121001.pdf
non disponibili
Tipologia:
Documento in Pre-print
Licenza:
Accesso chiuso-personale
Dimensione
192.77 kB
Formato
Adobe PDF
|
192.77 kB | Adobe PDF | Visualizza/Apri |
I documenti in ARCA sono protetti da copyright e tutti i diritti sono riservati, salvo diversa indicazione.