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The informational divide

Nermuth, M and Pasini, G and Pin, P and Weidenholzer, S (2013) 'The informational divide.' Games and Economic Behavior, 78 (1). 21 - 30. ISSN 0899-8256

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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. © 2012 Elsevier Inc.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 07 Mar 2013 15:56
Last Modified: 30 Jan 2019 16:17

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