Price dispersion in a simultaneous move salop-stiglitz search model without rationing

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Advances in Applied Microeconomics

ISSN: 0278-0984
Series editor(s): Professor Michael Baye, Professor John Maxwell

Subject Area: Economics

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Title:	Price dispersion in a simultaneous move salop-stiglitz search model without rationing
Author(s):	Edward L. Golding, Steven Slutsky
Volume:	8 ISBN: 978-0-76230-576-6 eISBN: 978-1-84950-037-1
Citation:	Edward L. Golding, Steven Slutsky (2000), Price dispersion in a simultaneous move salop-stiglitz search model without rationing, in (ed.) 8 (Advances in Applied Microeconomics, Volume 8), Emerald Group Publishing Limited, pp.223-248
DOI:	10.1016/S0278-0984(99)08011-6 (Permanent URL)
Publisher:	Emerald Group Publishing Limited
Article type:	Full length article
Abstract:	Salop and Stiglitz analyzed an equilibrium search model under a Stackelberg assumption that consumers could react to changes in the distribution of prices charged by firms even though they did not know which particular firms were charging the lowest price. In this chapter we assume that firms and consumers move simultaneously so that consumers cannot react to changes in the price distribution. We also assume that a firm cannot limit sales if demand exceeds its desired supply at the price it sets. In contrast to Salop and Stiglitz, a single-price equilibrium at the monopoly price always exists. For most distributions of consumer search costs, a range of two-price equilibria will also exist. In the two-price equilibria, the high price is always the monopoly price while the low price varies in a range above the minimum of average total cost.