Maarten C.W. Janssen
Non-reservation price equilibria and consumer search
Janssen, Maarten C.W.; Parakhonyak, Alexei; Parakhonyak, Anastasia
Authors
Alexei Parakhonyak
Anastasia Parakhonyak
Contributors
Dr Anastasiia Parakhoniak anastasiia.parakhoniak@durham.ac.uk
Other
Abstract
Reservation price equilibria (RPE) do not accurately assess market power in consumer search markets. In most search markets, consumers do not know important elements of the environment in which they search (such as, for example, firms' cost). We argue that when consumers learn when searching, RPE suffer from theoretical issues, such as non-existence and critical dependence on specific out-of-equilibrium beliefs. We characterize equilibria where consumers rationally choose search strategies that are not characterized by a reservation price. Non-RPE always exist and do not depend on specific out-of-equilibrium beliefs. Non-RPE have active consumer search and are consistent with recent empirical findings.
Citation
Janssen, M. C., Parakhonyak, A., & Parakhonyak, A. (2017). Non-reservation price equilibria and consumer search. Journal of Economic Theory, 172, 120-162. https://doi.org/10.1016/j.jet.2017.08.003
Journal Article Type | Article |
---|---|
Acceptance Date | Aug 7, 2017 |
Online Publication Date | Aug 18, 2017 |
Publication Date | Nov 1, 2017 |
Deposit Date | Sep 25, 2018 |
Publicly Available Date | Sep 27, 2018 |
Journal | Journal of Economic Theory |
Print ISSN | 0022-0531 |
Publisher | Elsevier |
Peer Reviewed | Peer Reviewed |
Volume | 172 |
Pages | 120-162 |
DOI | https://doi.org/10.1016/j.jet.2017.08.003 |
Public URL | https://durham-repository.worktribe.com/output/1313496 |
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Copyright Statement
© 2017 The Authors. Published by Elsevier Inc. This is an open access article under the CC BY license
(http://creativecommons.org/licenses/by/4.0/).
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