Seminarios académicos y conferencias
"Price Dispersion, Oligopolies and Search Frictions"
4 Octubre 2018 - 17:00 hrs
Sala 209, Facultad de Ciencias Económicas y Administrativas UC
Abstract: This paper studies equilibrium pricing in a market for an indivisible good. Firms simultaneously post prices, while buyers search sequentially for sellers. Due to market power, price posting accounts for buyer’s behavior as well as competitors pricing decisions. Our search theoretic model accounts for three key features: heterogeneous firms —in size and efficiency— and buyers —in valuations—, as well as search frictions. Absent heterogeneity on one side of the market yields a unique equilibrium price (Diamond Paradox). Firm heterogeneity itself does not yield dispersion. Our model predicts that price dispersion generically arises only when frictions exists, buyers are sufficiently dispersed and firms are heterogeneous.