Janssen, Maarten C.W. and Parakhonyak, Alexei and Parakhonyak, Anastasia (2017) 'Non-reservation price equilibria and consumer search.', Journal of economic theory., 172 . pp. 120-162.
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.
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|Publisher Web site:||https://doi.org/10.1016/j.jet.2017.08.003|
|Publisher 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/).|
|Date accepted:||07 August 2017|
|Date deposited:||27 September 2018|
|Date of first online publication:||18 August 2017|
|Date first made open access:||No date available|
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