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Oligopolistic markets with sequential search and production cost uncertainty

Janssen, M and Pichler, P and Weidenholzer, S (2011) 'Oligopolistic markets with sequential search and production cost uncertainty.' RAND Journal of Economics, 42 (3). 444 - 470. ISSN 0741-6261

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This article analyzes a sequential search model where firms face identical but stochastic production costs, the realizations of which are unknown to consumers. We characterize a perfect Bayesian equilibrium satisfying a reservation price property and provide a sufficient condition for such an equilibrium to exist. We show that (i) firms set on average higher prices and make larger profits compared to the scenario where consumers observe production costs, (ii) expected prices and consumer welfare can be non-monotonic in the number of firms, and (iii) the impact of production cost uncertainty vanishes as the number of firms becomes very large. © 2011, RAND.

Item Type: Article
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Social Sciences > Economics, Department of
Depositing User: Jim Jamieson
Date Deposited: 27 Jun 2012 15:12
Last Modified: 30 Jan 2019 16:17

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