Arbeitspapier
Price dispersion in dynamic competition
In product markets, there exists substantial dispersion in prices for transactions of physically identical goods, and incumbent sellers sell at higher prices than entrants. This study develops a theory of dynamic pricing that explains these facts as results from the same fundamental friction: Buyers are imperfectly aware of which sellers are operating, and the degree of awareness about a seller is ndogenous. The equilibrium is unique and efficient, and features randomized pricing strategies where incumbents post higher prices than entrants. If buyers' memory depreciation is low, then the equilibrium of the industry tends to approximate perfectly competitive conditions over time.
- Language
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Englisch
- Bibliographic citation
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Series: Texto para discussão ; No. 675
- Classification
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Wirtschaft
Bargaining Theory; Matching Theory
Consumer Economics: Theory
Market Structure, Pricing, and Design: General
Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
- Subject
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Buyer Awareness
Price Dispersion
Customer Capital
Industry Life Cycle
Information Frictions
- Event
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Geistige Schöpfung
- (who)
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Guthmann, Rafael R.
- Event
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Veröffentlichung
- (who)
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Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia
- (where)
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Rio de Janeiro
- (when)
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2020
- Handle
- Last update
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10.03.2025, 11:44 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Guthmann, Rafael R.
- Pontifícia Universidade Católica do Rio de Janeiro (PUC-Rio), Departamento de Economia
Time of origin
- 2020