Uncertain Product Availability in Search Markets

The only Dance in Town: Unique Equilibrium in a Generalized Model of Price Competition*

“…Models of price competition with heterogeneously‐informed consumers offered an early rationalization of price dispersion in homogeneous‐goods markets (foundational studies include Rosenthal [1980]; Narasimhan [1988]; Shilony [1977]; Varian [1980]). Since then, the framework has been applied to, or featured in, a wide range of settings including: consumer search (both theoretical, e.g., Atayev [2019]; Burdett and Judd [1983]; Janssen and Moraga‐Gonzàlez [2004]…”

“…Models of price competition with heterogeneously-informed consumers offered an early rationalization of price dispersion in homogeneous-goods markets (foundational studies include Rosenthal [1980]; Narasimhan [1988]; Shilony [1977]; Varian [1980]). Since then, the framework has been applied to, or featured in, a wide range of settings including: consumer search (both theoretical, e.g., Atayev [2019]; Burdett and Judd [1983]; Janssen and Moraga-Gonzàlez [2004]; Stahl [1989], and empirical studies, e.g., De los Santos et al [2012]; De los Santos [2018]; Honka [2014]; Honka and Chintagunta [2016]; Pires [2016]); price discrimination (Armstrong and Vickers [2019]; Fabra and Reguant [2020]); product substitutability (Inderst [2002]); strategic clearinghouses such as comparison websites (Arnold and Zhang [2020]; Baye and Morgan [2001]; Moraga-Gonzàlez and Wildenbeest [2012]; Ronayne [2020]; Ronayne and Taylor [2020]; Shelegia and Wilson [2020]); competition with boundedly-rational consumers (e.g., Carlin [2009]; Chioveanu and Zhou [2013]; Gu and Wenzel [2014]; Heidhues et al [2020]; Inderst and Obradovits [2020]; Johnen [2020]; Piccione and Spiegler [2012]; Spiegler [2006Spiegler [ , 2016); and switching costs (for a review, see Farrell and Klemperer [2007]).…”

Uncertain Product Availability in Search Markets

“…To obtain an equilibrium with active search and to provide some insights into the effect of greater product availability on that equilibrium, we consider a special case of sequential search in the working paper version of our study (Atayev (2019)). There we incorporate a share of consumers with zero search costs.…”