Competitive Equilibria in Markets for Heterogeneous Goods under Imperfect Information: A Theoretical Analysis with Policy Implications
- Creators
- Schwartz, Alan
- Wilde, Louis L.
Abstract
This article 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 allows the existence of product heterogeneity. Our principal conclusions are that markets for heterogeneous search goods tend rather easily to segment into homogeneous subsets; when they do not, heterogeneity 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, Matthew Spitzer, and James Strnad made helpful comments on prior drafts. The article benefited substantially from a conversation with Michael Rothschild and from a presentation at the UCLA Law and Economics workshop. Also the editorial board of this journal and the referees made a number of helpful suggestions.Attached Files
Published - 3003439.pdf
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Additional details
- Eprint ID
- 82162
- Resolver ID
- CaltechAUTHORS:20171006-110953172
- DAR-8016066
- NSF
- Created
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2017-10-06Created from EPrint's datestamp field
- Updated
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2021-11-15Created from EPrint's last_modified field