Equilibrium Price Dispersion with Online Search
Date
2010
Authors
Journal Title
Journal ISSN
Volume Title
Publisher
IEEE Computer Society
Abstract
This paper studies how consumers' online search
behavior may trigger pervasive and persistent online
price dispersion. We set up a game-theoretic model to
examine the oligopolistic price competition, given the
two unique features of online search, namely, the
existence of a common search ordering and shoppers
who have non-positive search cost. We show that in
absence of further heterogeneity, the unique online
search behaviors alone can drive significant level of
price dispersion. Specifically, we derive twodimensional
price dispersion, with both temporal
fluctuation and spatial variation. We show that
equilibrium price expectation monotonically decreases
in line with consumers' search ordering. We also
uncover a unique format of equilibrium pricing with
stair-like sequence of price supports and localized
price competition.
Description
Keywords
Citation
Lizhen Xu, Jianqing Chen, Andrew Whinston, "Equilibrium Price Dispersion with Online Search," hicss, pp.1-11, 2010 43rd Hawaii International Conference on System Sciences, 2010