Market Equilibrium with FSS Search

• Type: Article in International Scientific Journal
• Date: 2004

Authors

Pedro Cosme da Costa Vieira (Author) FEP

Journal

Title: Applied Economics Letters

Vol. 11 No. 5

Pages: 323-324

ISSN: 1350-4851

Publisher: Taylor & Francis

Indexing

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Other information

Authenticus ID: P-000-ASP

DOI: 10.1080/1350485042000221616

Abstract (EN): It is acknowledge that in the trading of homogeneous goods there is persistent price dispersion. However, it is theoretically derived that if buyers are optimisers there is no price dispersion. This negative result motivates the emergence of alternative paths in the literature that study price dispersion. In Burdett and Judd's (1983) seminal work, buyers follow the sub-optimal fixed sample size search strategy, FSS. These authors claim that under this sub-optimal strategy there are, ex-ante, three points of Nash equilibrium, being two of them associated with price dispersion and search. In my paper, I show that these two points of equilibrium with price dispersion are not empirically relevant because they will not be ex-post enforced, being unproductive for explaining equilibrium price dispersion the use of the FSS sub-optimal search strategy.

Language: Portuguese

Type (Professor's evaluation): Scientific

No. of pages: 2