Competitive Equilibria in Markets for Heterogeneous Goods Under Imperfect Information: A Theoretical Analysis with Policy Implications
- Creators
- Schwartz, Alan
- Wilde, Louis L.
Abstract
This paper characterizes necessary and sufficient conditions for heterogeneous search goods to trade at their competitive prices, and derives policy implications from these conditions. The model differs from earlier search equilibrium models in that it assumes the existence of product heterogeniety. Our principle conclusions are that markets for heterogeneous search goods tend rather easily to segment into homogeneous subsets; when they do not, heterogeniety can work against the existence of competitive equilibria because it dilutes the effectiveness of search. Nevertheless, the likelihood of competitive equilibria obtaining in heterogeneous search goods markets can often be increased by reducing the costs to consumers of directly comparing purchase alternatives.
Additional Information
This research was supported by NSF Grant No. DAR-8016066. Edward J. Green, John Ferejohn, and James Strnad made helpful comments on prior drafts. The paper also benefited from a conversation with Michael Rothchild and presentation at the UCLA Law and Economics workshop. Published as Schwartz, Alan, and Louis L. Wilde. "Competitive equilibria in markets for heterogeneous goods under imperfect information: a theoretical analysis with policy implications." The Bell Journal of Economics (1982): 181-193.Attached Files
Submitted - sswp381.pdf
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Additional details
- Eprint ID
- 82133
- Resolver ID
- CaltechAUTHORS:20171005-152244248
- DAR-8016066
- NSF
- Created
-
2017-10-06Created from EPrint's datestamp field
- Updated
-
2019-10-03Created from EPrint's last_modified field
- Caltech groups
- Social Science Working Papers
- Series Name
- Social Science Working Paper
- Series Volume or Issue Number
- 381