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IESE Research Papers,
IESE Business School

No D/869: Nonsequential search equilibrium with search cost heterogeneity

Jose L. Moraga-Gonzalez (), Zsolt Sandor and Matthijs R. Wildenbees
Additional contact information
Jose L. Moraga-Gonzalez: IESE Business School, Postal: Research Division, Av Pearson 21, 08034 Barcelona, SPAIN
Zsolt Sandor: University of Groningen
Matthijs R. Wildenbees: Kelly School of Business

Abstract: We generalize the model of Burdett and Judd (1983) to the case where an arbitrary finite number of firms sells a homogeneous good to buyers who have heterogeneous search costs. We show that a price dispersed symmetric Nash equilibrium always exists. Numerical results show that the behavior of prices with respect to the number of firms hinges upon the shape of the search cost distribution: when search costs are relatively concentrated (dispersed), entry of firms leads to higher (lower) average prices.

Keywords: nonsequential search; oligopoly; arbitrary search cost distributions

JEL-codes: C72; D43

20 pages, July 13, 2010

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