Equilibrium price dispersion with sequential search

Menzio, Guido; Trachter, Nicholas

doi:10.1016/j.jet.2015.09.004

Cited by 45 publications

(36 citation statements)

References 22 publications

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“…It is interesting to contrast the type of price discrimination advanced in Kaplan et al (2016) with intertemporal price discrimination (see, e.g., Conlisk et al [1984] and Sobel [1984] or, in a search-theoretic context, Albrecht et al [2013] and Menzio and Trachter [2015b]). The key to intertemporal price discrimination is a negative correlation between a buyer's valuation and his ability to intertemporally substitute purchases.…”

Section: Discussionmentioning

confidence: 99%

Price Dispersion When Stores Sell Multiple Goods

Trachter¹

2017

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S earch frictions are a prominent departure from the standard style of model we tend to write, which relies on frictionless Walrasian markets. They are not only prominent because they help us construct interesting models where policy can play a particularly important role, but also because search frictions are relatively easy to measure in the data. A large fraction of the literature on search frictions dwells with models of product markets where, for one reason or another, customers face a cost to act in the market (i.e., pay a search or switching cost to switch stores, pay a cost to learn a set of prices, etc.). A well-known result in a large class of models (based on the seminal work of Burdett and Judd [1983]) is that price dispersion for identical goods arises in equilibrium.The empirical evidence on price dispersion for product marketsa good measure of the extent of the friction, as there should be no price dispersion for homogeneous goods in a Walrasian market -is large, mostly documenting dispersion for particular goods in retail markets. The literature abstracts from several important features of retail markets. One of these features is that most stores sell multiple goods, a feature that not only changes the measurement of search frictions, but also opens new avenues for theoretical research, given the scant availability of models of multiproduct pricing, i.e., models where …rms price multiple goods simultaneously. In this paper, I review the work of Kaplan et al. (2016) (KMRT from now on), which is a recent study on the empirical properties of price dispersion in a multiproduct setting and provides a model to rationalize it.The views expressed in this article are those of the author and do not necessarily represent those of the Federal Reserve Bank of Richmond or the Federal Reserve System.

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Section: Discussionmentioning

confidence: 99%

Price Dispersion When Stores Sell Multiple Goods

Trachter¹

2017

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“…The …rst line on the right-hand side of (15) follows from (8) and the expression for the marginal price distributions F d and F n in (13). The second line on the right-hand side of (15) follows from algebraic manipulation of the …rst.…”

Section: Equilibrium Without Within-store Price Dispersionmentioning

confidence: 99%

“…When x > y and x > y , condition (17) is violated and, hence, there is no equilibrium in which all sellers post the same price at both times of day, and the marginal price distributions F d and F n are given by (13). Intuitively, when x > y and x > y , sellers face more competition at night than during the day.…”

Section: Equilibrium Without Within-store Price Dispersionmentioning

confidence: 99%

“…When x > y and x < y , condition (17) is satis…ed and, hence, there exists an equilibrium in which all sellers post the same price at both times of day, and the marginal price distributions F d and F n are given by (13). In this equilibrium, there is price dispersion across stores-in the sense that di¤erent sellers post di¤erent prices-but no price dispersion within stores-in the sense that every seller posts the same price at all times.…”

Section: Equilibrium Without Within-store Price Dispersionmentioning

confidence: 99%

“…Second, as suggested by Aguirregabiria (1999), a seller may change his price during a quarter in response to changes in his inventories of the good. Finally, as suggested by Menzio and Trachter (2014), a large seller may change his price over time in order to occasionally price out of the market a fringe of small sellers. supply side, there are identical sellers and each seller posts a (potentially di¤erent) price for the good in the daytime and in the nighttime.…”

Section: Introductionmentioning

confidence: 99%

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Equilibrium Price Dispersion Across and within Stores

Menzio

Trachter

2015

SSRN Journal

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We develop a search-theoretic model of the product market that generates price dispersion across and within stores. Buyers di¤er with respect to their ability to shop around, both at di¤erent stores and at di¤erent times. The fact that some buyers can shop from only one seller while others can shop from multiple sellers causes price dispersion across stores. The fact that the buyers who can shop from multiple sellers are more likely to be able to shop at inconvenient times induces price dispersion within stores. Speci…cally, it causes sellers to post di¤erent prices for the same good at di¤erent times in order to discriminate between di¤erent types of buyers.JEL Codes: D43.

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Partial‐depth search and search pattern comparisons

Liu,

Wang,

Shen

2023

Manage Decis Econ

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This paper compares consumers' optimal search behaviors and firms' strategic reactions in prices under two modes of search: parallel search and sequential search, with the incorporation of partial search depth that measures the amount of information to evaluate a product. Our analysis shows a series of new results: when products are partially evaluated, search depth is greater under sequential search than under parallel search; consumers search for (on average) more products either under parallel search or sequential search, depending on whether partial‐depth search is chosen; the equilibrium price is higher under parallel (sequential) search when search costs are high (low). Interestingly, parallel search might yield higher equilibrium prices with more products searched, compared with sequential search. This challenges the conventional wisdom in the search literature that more products searched lower prices because of the intensified competition.

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Equilibrium price dispersion with sequential search

Cited by 45 publications

References 22 publications

Price Dispersion When Stores Sell Multiple Goods

Price Dispersion When Stores Sell Multiple Goods

Equilibrium Price Dispersion Across and within Stores

Partial‐depth search and search pattern comparisons

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