Author: Daniel B. Leiter
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Saul Lach
Publisher:
ISBN:
Category : Economics
Languages : en
Pages : 26

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Using a unique data set on store-level monthly prices of four homogenous products sold in Israel, I study the existence and characteristics of the dispersion of prices across stores, as well as its persistence over time. I find that price dispersion prevails even after controlling for observed and unobserved product heterogeneity. Moreover, intra-distribution mobility is significant: stores move up and down the cross-sectional price distribution. Thus, consumers cannot learn about stores that consistently post low prices. As a consequence, price dispersion does not disappear and persists over time as predicted by Varian's (1980) model of sales

Author: Jiandong Ju
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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We develop a microstructure model of a market for a homogeneous good in which trade amongst heterogeneous consumers and producers is intermediated by middlemen and oligopolistic market makers (gatekeepers). Market makers post bid and ask prices which are freely observable. Middlemen stand ready to trade at bid and ask prices they quote on a private basis to consumers or producers who identify these intermediaries via a costly search process. We model competition between market makers as a two-stage game: capacity setting in the first stage and bid and ask price setting in the second stage. We characterize the equilibrium market structure of intermediaries and the distribution of prices in equilibrium. Our main focus is the effect on prices that emerges following a change in the market structure of intermediation, specifically through the exit of a market maker. Exit of a market maker initially results in a shift of trade from market makers as a whole to middlemen resulting in an increase in price dispersion. Following transition to the new market structure with fewer market makers, price dispersion returns to its pre-exit level when total trade passing through the remaining market makers is roughly equal to the pre-exit level. We present an empirical study of price dispersion in the North American natural gas market for the period before and following the exit of Enron, a major market maker in late 2001. The empirical evidence supports the main propositions of our theory: price dispersion jumped 4-fold immediately following Enron's exit but returned to its pre-exit level within roughly 2 months following the exit date.

Author: Dennis Eggert
Publisher: GRIN Verlag
ISBN: 3638801381
Category : Business & Economics
Languages : en
Pages : 16

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Seminar paper from the year 2006 in the subject Economics - Industrial Economics, grade: 1,0, Helsinki School of Economics, course: Industrial Organisation, language: English, abstract: The main issue in the article is the derivation of a model in which prices can differ in equilibrium, even though the goods are homogeneous and there is asymmetric information in the market. The reason for this price dispersion is caused by consumer heterogeneity. Salop and Stiglitz explain, that “because of differences in preference or ability, some agents perform much better than others in market decisions.” To model this kind of heterogeneity they assign different costs of gathering certain information to the consumers. For simplicity they part the consumers in two groups: The first one consists of low-cost information gatherer and the other group has higher cost to gain complete information. For further simplicity there are just two levels of information: to be completely informed or to be not informed at all. Furthermore the costs to become an informed consumer are fixed. The differences in information in this model regard the locations of the shops. All consumers know about all prices that are in the market, they just do not know where the shop with a certain (the lowest) price is. The shops on the other hand have complete information about the market. They know about the differences between the consumers and can compute the demand that will occur, when they ask a certain price. So they face a trade-off between higher prices and lower demand. It is important to state why there is a possibility of raising the price and not to loose all demand like it would be in a perfect market. When the rise in price is not too high, it does not pay for the high-cost information gatherer to become completely informed. Their expected loss by buying randomly either in low- or high-priced shops is lower than the fixed cost of gathering the information. All together this consumer heterogeneity and the fully informed shops can lead to price dispersion in equilibrium, even though the goods are homogeneous and there is the difference in information between the actors.

Author: Pedro Cosme Vieira
Publisher:
ISBN:
Category :
Languages : en
Pages : 7

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Although it is an empirical regularity that in the trading of homogeneous goods there are persistent price dispersion and competition between sellers, it is theoretically derived that when buyers are optimisers, in market equilibrium, there are neither price dispersion nor competition (the Diamond's paradox). This undesirable theoretical result induces the growth of doubt in the relevance of using optimisation in the study of human behaviour (the Hey's critique). In this work I demonstrate that it is not necessary to abandon the optimisation framework to overturn this pitfall if assumed that economic agents have computational restrictions. That is, I demonstrate that when optimiser buyers have search and computational costs in market equilibrium there is price dispersion, search and competition between sellers.

Author: Dennis Eggert
Publisher: GRIN Verlag
ISBN: 3638803473
Category : Business & Economics
Languages : en
Pages : 36

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Seminar paper from the year 2006 in the subject Economics - Industrial Economics, grade: 1,0, Helsinki School of Economics, course: Industrial Organisation, 18 entries in the bibliography, language: English, abstract: The main issue in the article is the derivation of a model in which prices can differ in equilibrium, even though the goods are homogeneous and there is asymmetric information in the market. The reason for this price dispersion is caused by consumer heterogeneity. Salop and Stiglitz explain, that "because of differences in preference or ability, some agents perform much better than others in market decisions." To model this kind of heterogeneity they assign different costs of gathering certain information to the consumers. For simplicity they part the consumers in two groups: The first one consists of low-cost information gatherer and the other group has higher cost to gain complete information. For further simplicity there are just two levels of information: to be completely informed or to be not informed at all. Furthermore the costs to become an informed consumer are fixed. The differences in information in this model regard the locations of the shops. All consumers know about all prices that are in the market, they just do not know where the shop with a certain (the lowest) price is. The shops on the other hand have complete information about the market. They know about the differences between the consumers and can compute the demand that will occur, when they ask a certain price. So they face a trade-off between higher prices and lower demand. It is important to state why there is a possibility of raising the price and not to loose all demand like it would be in a perfect market. When the rise in price is not too high, it does not pay for the high-cost information gatherer to become completely informed. Their expected loss by buying randomly either in low- or high-priced shops is lower than the fixed cost of gathering the information. All toget

Author: Marcel Cohen
Publisher:
ISBN:
Category :
Languages : en
Pages :

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Author: Aaron Bodoh-Creed
Publisher:
ISBN:
Category :
Languages : en
Pages : 41

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Substantial price variation for homogeneous goods in online markets is a well-known puzzle that has withstood attempts by empirical researchers to explain it. Economic theory suggests two possible sources of the dispersion: either market frictions are more important than previously thought, or there are subtle differences between product listings presented to e-commerce consumers that applied econometricians have failed to detect. We use a very detailed data set consisting of posted-price listings for new Kindle Fire tablets from eBay to determine if observable listing heterogeneity can explain the price dispersion of seemingly homogeneous products. By combining a richer set of variables than previous studies with more sophisticated machine learning techniques, we can explain 42% of the dispersion. We interpret this as a bound on the influence of market frictions on price dispersion. Variables describing the amount of information in the listing are good predictors of the price, but variables describing the style of a listing's text are good predictors as well. We identify readily interpretable groups of words that are also good predictors of price. We find a high degree of heterogeneity of the marginal effects of seller reputation and including an image in the listing, but the patterns of heterogeneity largely conform to economic intuition. A smaller, but non-trivial, latitude for market frictions remains, and we discuss their possible sources.

Author: Dieter Pennerstorfer
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Limited information is the key element generating price dispersion in models of homogeneous-goods markets. We show that the global relationship between information and price dispersion is an inverse-U shape. We test this mechanism for the retail gasoline market using a new measure of information based on commuter data from Austria. Commuters sample gasoline prices on their commuting route, providing us with spatial variation in the share of informed consumers. Our empirical estimates are in line with the theoretical predictions. We also quantify how information affects average prices paid and the distribution of surplus in the gasoline market.

Author: R.J. Aumann
Publisher: Elsevier
ISBN: 9780444894274
Category : Business & Economics
Languages : en
Pages : 824

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Book Description
This is the second of three volumes surveying the state of the art in Game Theory and its applications to many and varied fields, in particular to economics. The chapters in the present volume are contributed by outstanding authorities, and provide comprehensive coverage and precise statements of the main results in each area. The applications include empirical evidence. The following topics are covered: communication and correlated equilibria, coalitional games and coalition structures, utility and subjective probability, common knowledge, bargaining, zero-sum games, differential games, and applications of game theory to signalling, moral hazard, search, evolutionary biology, international relations, voting procedures, social choice, public economics, politics, and cost allocation. This handbook will be of interest to scholars in economics, political science, psychology, mathematics and biology. For more information on the Handbooks in Economics series, please see our home page on http://www.elsevier.nl/locate/hes