Nermuth, Manfred and Pasini, Giacomo and Pin, Paolo and Weidenholzer, Simon (2013) The informational divide. Games and Economic Behavior, 78 (1). pp. 21-30. DOI https://doi.org/10.1016/j.geb.2012.10.016
Nermuth, Manfred and Pasini, Giacomo and Pin, Paolo and Weidenholzer, Simon (2013) The informational divide. Games and Economic Behavior, 78 (1). pp. 21-30. DOI https://doi.org/10.1016/j.geb.2012.10.016
Nermuth, Manfred and Pasini, Giacomo and Pin, Paolo and Weidenholzer, Simon (2013) The informational divide. Games and Economic Behavior, 78 (1). pp. 21-30. DOI https://doi.org/10.1016/j.geb.2012.10.016
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. © 2012 Elsevier Inc.
Item Type: | Article |
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Uncontrolled Keywords: | Price dispersion; Welfare effects of search; Price competition on networks; Informational divide |
Subjects: | H Social Sciences > HB Economic Theory |
Divisions: | Faculty of Social Sciences Faculty of Social Sciences > Economics, Department of |
SWORD Depositor: | Unnamed user with email elements@essex.ac.uk |
Depositing User: | Unnamed user with email elements@essex.ac.uk |
Date Deposited: | 07 Mar 2013 15:56 |
Last Modified: | 30 Oct 2024 20:12 |
URI: | http://repository.essex.ac.uk/id/eprint/5787 |