a model of temporary search market equilibrium abstract in the literature on search markets agents know the distribution of prices or learn about it through short run bayesian updating even though the first assumption is unrealistic and the empirical evidence emphasizes learning in the intermediate and long runs in this paper a new search markets theory is developed where agents have beliefs about the distribution of prices based on finitely many of its moments and past market experiences the main results are the existence of a hicks grandmont temporary equilibrium that the equilibrium correspondence has a closed graph and sufficient conditions for price dispersion a simple example illustrates the main ideas journal of economic literature classification numbers d83 l13

rockets and feathers understanding asymmetric pricing prices rise like rockets but fall like feathers this stylized fact of most markets is con rmed by many empirical studies in this paper i develop a model with competitive rms and rational partially informed consumers where such asymmetric response to costs by rms emerges naturally in contrast to public opinion and past work collusion is not necessary to explain such result using a rich dataset of retail gasoline prices i nd the observed price dispersion pattern to be consistent with the model s prediction

oligopolistic markets with sequential search and production cost uncertainty this article analyzes a sequential search model where firms face identical but stochastic production costs the realizations of which are unknown to consumers we characterize a perfect bayesian equilibrium satisfying a reservation price property and provide a sufficient condition for such an equilibrium to exist we show that i firms set on average higher prices and make larger profits compared to the scenario where consumers observe production costs ii expected prices and consumer welfare can be non monotonic in the number of firms and iii the impact of production cost uncertainty vanishes as the number of firms becomes very large

search with learning understanding asymmetric price adjustments in many retail markets prices rise faster than they fall we develop a model of search with learning to explain this phenomenon of asymmetric price adjustments by extending our static game analysis to the dynamic setting we demonstrate that asymmetric price adjustments arise naturally when a positive cost shock occurs all the searchers immediately learn the true state the search intensity and hence the prices fully adjust in the next period when a negative cost shock occurs it takes longer for nonsearchers to learn the true state and the search intensity increases gradually leading to slow falling of prices

learning in an equilibrium search model this paper explores the role of learning in an equilibrium search model with asymmetric information firms with identical but privately observed marginal cost sell a homogeneous good to heterogeneously informed consumers a reservation price equilibrium exists if the uninformed consumers search cost is sufficiently large in this equilibrium the amount of price dispersion is inversely related to the realization of marginal cost also the average price level is less responsive to cost changes than when cost is observable finally uncertainty about firms marginal cost increases the expected price level copyright 1994 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

search with learning for differentiated products evidence from e commerce this article provides a method to estimate search costs in a differentiated product environment in which consumers are uncertain about the utility distribution consumers learn about the utility distribution by bayesian updating their dirichlet process prior beliefs the model provides expressions for bounds on the search costs that can rationalize observed search and purchasing behavior using individual specific data on web browsing and purchasing behavior for mp3 players sold online we show how to use these bounds to estimate search costs as well as the parameters of the utility distribution our estimates indicate that search costs are sizable we show that ignoring consumer learning while searching can lead to severely biased search cost and elasticity estimates

consumer search and dynamic price dispersion an application to gasoline markets this article studies the role of imperfect information in explaining price dispersion we use a new panel data set on the u s retail gasoline industry and propose a new test of temporal price dispersion to establish the importance of consumer search we show that price rankings vary significantly over time however they are more stable among stations at the same street intersection weestablishtheequilibriumrelationshipsbetweenpricedispersionandkeyvariables from consumer search models price dispersion increases with the number of firms in the market decreases with the production cost and increases with search costs

non reservation price equilibria and consumer search abstract 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

five centuries of energy prices concerns about rising energy prices tend to occur in times of economic expansion to disappear in times of recession a recurring fear is that in the long run real energy prices will trend upwards this paper presents evidence from five hundred years of prices of energy sources for the united kingdom over this time period there is little support for any general trend of rising fuel prices and some evidence of significant declines using this information on prices and consumer expenditure to weight the series an average price of energy series has been created reflecting the substitution away from more scarce fuels driving prices down and towards more valuable ones driving prices up over more than five hundred years and albeit with significant long lived fluctuations there seems little evidence of a rising long run trend in the real price of energy

inflation price dispersion and market structure abstract in this paper we use a novel data set containing prices from bazaars convenience stores and supermarkets in istanbul to re examine the relationship between price dispersion and inflation although existing evidence is mixed we find positive and significant relationships between dispersion on the one hand and lagged dispersion and unexpected product specific inflation on the other we also find evidence that dispersion is initially decreasing in anticipated aggregate inflation but is eventually increasing finally average price duration and dispersion are lowest in the bazaar this is intuitive since menu and search costs should be minimal in that market structure

testing for unit roots in panel data are wages on different bargaining levels cointegrated theoritical considerations suggest that spillover forces equalize wages for similar jobs thus it is expected that firm wages are cointegrated with the corresponding wage rates on an industrial level in this paper we apply various unit root tests to a panel of wage data we show that the familiar techniques can be adopted to this type of data allowing for unobserved heterogeneity and common time effects our results suggest that firm and industry wages both possess a unit root in the autoregressive representation however ther is only weak evidence for a cointegration realtionship

regional wage spillover in canada the persistently high unemployment rate of the atlantic region of canada may be a symptom of importation into the region of inappropriately high wage levels from other canadian regions a theoretical explanation for the existence of such interregional wage spillover is offered the hypothesis of spillover is empirically examined using data on the wage change provisions of individual contracts in the manufacturing sector possible econometric problems associated with contract data are examined and corrective measures taken results of the estimation support the hypothesis that wage spillover plays a role in the determination of atlantic region wages copyright 1987 by mit press

energy and the long cycles abstract the hypothesis is submitted in this paper that energy directly or indirectly had much more to do with the generation of the long kondratiev cycles than generally recognized an attempt is made to test this and it is suggested that the next upturn may also be energy related

on fruitful and futile tests of the relationship between search and price dispersion we exploit cross sectional and temporal differences in search intensity in order to examine the relationship between search costs and price dispersion using a hand collected panel data set from jerusalem s shuk mahane yehuda outdoor market we present empirical evidence that price dispersion increases with the cost of search using several different measures of price dispersion however our interpretation of this finding is sensitive to the search proxy in question we also address several acute difficulties facing empiricists seeking to test theoretical price dispersion models in which consumers are heterogeneous in their search behavior jel l11 l13

dividing online and offline a case study every new method of trade offers an opportunity for economic agents to compare its costs and benefits relative to the status quo such comparison motivates sorting across market segments and reshapes the whole marketplace the internet provides an excellent example it introduces substantial search cost savings over brick and mortar retail stores but imposes new obstacles for sellers to convey quality using sports card trading as a case study we provide empirical evidence on 1 the sorting of product quality between the online and offline segments 2 the changes for retail outlets after the internet came into place and 3 how supporting industries such as professional grading and card manufacturing adapted to take advantage of the new market copyright 2007 wiley blackwell

asymmetric price effects of competition when price dispersion is prevalent a relevant question is what happens to the whole distribution of equilibrium prices when the number of firms changes using data from the gasoline market in the netherlands we find first that markets with n competitors have price distributions that first order stochastically dominate the price distributions in markets with n 1 firms second the effect of competition is stronger for the medium to upper percentiles of the price distribution finally consumer gains from competition are larger for relatively well informed consumers to account for these empirical patterns we extend varian s 1980 model by allowing for richer heterogeneity in consumer price information

the cyclicality of consumption wages and employment of the public sector in the euro area this study empirically examines the business cycle behaviour of public consumption and its main components the public wage bill including its breakdown into compensation per employee and public employment and intermediate consumption in the euro area aggregate euro area countries and a group of selected non euro area organization for economic co operation and development oecd countries denmark sweden the uk japan and the us it looks across a large number of variables and methods using annual data from 1960 to 2005 it finds robust evidence supporting that public consumption wages and employment co move with the business cycle in a pro cyclical manner with 1 2 year lags notably for the euro area aggregate and euro area countries the findings reflect mainly the correlation between cyclical developments but also point to an important role of pro cyclical discretionary fiscal policies

rational buyers search when prices increase abstract we develop a dynamic pricing model motivated by observed patterns in business to business and some business to customer transactions seller costs are perfectly correlated and evolve according to a markov process in every period each buyer observes for free the price set by their current supplier but not the other sellers prices or the sellers common cost level by paying a cost s the buyer becomes active and benefits from bertrand competition among sellers we show that there exists a semi separating equilibrium whereby sellers increase price immediately when costs increase and otherwise decrease price gradually moreover buyers become active when prices increase but not otherwise in sum we deliver a theory whereby buyers become active search if and only if their supplier increases price

consumer search and double marginalization the well known double marginalization problem understates the inefficiencies arising from vertical relations in consumer search markets where consumers are uninformed about the wholesale prices charged by manufacturers to retailers consumer search provides a monopoly manufacturer with an additional incentive to increase its price worsening the double marginalization problem and lowering the manufacturer s profits nevertheless manufacturers in more competitive wholesale markets may not have an incentive to reveal their prices to consumers we show that retail prices decrease in search cost and so both industry profits and consumer surplus increase in search cost jel d11 d42 d83 l12 l25 l60 l81 in markets where consumers do not know retail prices and need to invest time and resources to get to know them they often also do not know retailers marginal costs even though consumers are not directly interested in retailers costs these costs are indicative for whether consumers should buy at the current shop or continue to search for the next offer this is particularly true when there is a significant common component in retailers costs for the same observed price at a particular retailer if the common cost is low the retailer s margin is high and it is more beneficial to check the price at the next retailer as he is likely to maintain a lower margin and hence to charge a lower price this paper studies consumer search in markets where retailers have a common marginal cost that is set by a manufacturer as a reference point we consider the unrealistic case where consumers are fully informed about the wholesale price that retailers must pay the manufacturer and show how the familiar double marginalization problem arises we then consider the more realistic setting where consumers

price quality and reputation evidence from an online field experiment we examine the link between price quality seller claims and seller reputation in internet auctions after purchasing actual baseball cards and having them professionally graded we find that some buyers in the online graded market are misled by incredible claims of quality they pay higher prices but do not receive better quality and in fact are defrauded more often online seller reputation is effective for identifying good faith sellers but conditional on completed auctions reputable sellers do not provide better quality evidence also suggests that high claim sellers target less experienced buyers we attribute these patterns to two loopholes in the ebay rating system we benefited from the comments of austan goolsbee raphael thomadsen john shea dan vincent david reiley larry ausubel peter cramton v joseph hotz jeff smith jimmy chan vincent crawford mark duggan and attendees at numerous seminars and conferences we are particularly grateful to seth sanders and john list for their constructive advice at the early stage of the research to timothy bresnahan rachel kranton and thomas hubbard for their detailed suggestions in reshaping earlier versions and to editor ariel pakes and two anonymous referees for their careful readings special thanks to eight friends who acted as our agents in purchasing baseball cards in retail markets and to numerous sports card store owners who shared their insights on the sportscard industry excellent research assistance from randy alexander moore and krzysztof fizyta is gratefully acknowledged any remaining errors are ours

advertising intensity and welfare in an equilibrium search model i analyze an equilibrium search model in a duopoly setting with bilateral heterogeneities in production and search costs in which firms can advertise by announcing price i compare the market advertising level to the socially optimal level where i find that costly search can improve welfare and that firms may under or over advertise relative to the social optimum depending on the costs of search the results suggest that in markets with sufficiently low search costs firms are likely over advertising relative to the socially optimal level and vice versa for markets with sufficiently high search costs

is the swedish central government a wage leader is the swedish central government a wage leader this question is studied empirically in a vector error correction model using a unique high quality data set it is first shown that salaries of white collar workers in the private sector and central government are cointegrated it is then found that private sector salaries are weakly exogenous to the system of equations this means that the private sector is the wage leader in the long run model it is also found that changes in central government salaries do not granger cause changes in private sector salaries together these findings clearly demonstrate that the central government is not placing undue pressure on salaries in the private sector the central government is not acting as a wage leader

wage dynamics in israel market forces and spillover effects the path of real wages in israel since the july 1985 stabilization programme an initial decline followed by excessive wage increases is not fully explained by macroeconomic variables the interaction of wage changes across industries is shown to play a key role in the development of average wages exogenous shocks affect industries unevenly setting off a short run wage comparison process between the different industries these dynamics act in combination with longer run competitive forces while in the very long run the wage system converges to a stable structure one implication of the analysis is that excessive restraint of the uniform nation wide wage component may in fact lead to higher overall wage increases it also helps to explain the persistence of the post stabilization rate of inflation

historical energy price shocks and their changing effects on the economy abstract the purpose of this paper is to identify the changes in the impact of energy shocks on economic activity with an interest in assessing if an economy s vulnerability and resilience to shocks improved with economic development using data on the united kingdom over the last three hundred years the paper identifies supply aggregate demand and residual shocks to energy prices and estimates their changing influence on energy prices and gdp the results suggest that the impacts of supply shocks rose with its increasing dependence on coal and declined with its partial transition to oil however the transition from exporting coal to importing oil increased the negative impacts of demand shocks more generally the results indicate that improvements in vulnerability and resilience to shocks did not progress systematically as the economy developed instead the changes in impacts depended greatly on the circumstances related to the demand for and supply of energy sources if these experiences are transferable to future markets a transition to a diversified mix of renewable energy is likely to reduce vulnerability and increase resilience to energy price shocks

non reservation price equilibrium and search without priors we analyse a model of oligopolistic competition in which consumers search without priors consumers do not have prior beliefs about the distribution of prices charged by firms and thus try to use a robust search procedure we show that the optimal stopping rule is stochastic and that for any distribution of search costs there is a unique market equilibrium which is characterised by price dispersion although listed prices approach the monopoly price as the number of firms increases the effective price paid by consumers does not depend on the number of firms

public or private sector wage leadership an international perspective whether a government acts as a wage leader placing pressure on private sector wages more open to competition or whether it plays a passive role and merely follows wage negotiations in the private sector there are important implications for macroeconomic development particularly in small open economies and or countries that are members of a monetary union such as those of the european monetary union with the notable exception of the case of sweden opinion on this issue is still divided in this paper we look at public and private sector wage interactions from an international perspective 18 oecd countries we focus on the causal two way relationship between public and private wage setting confirming that the private sector on the whole appears to have a stronger influence on the public sector rather than vice versa however we also find evidence of feedback effects from public wage setting which affect private sector wages in a number of countries when the private sector takes the lead on wages there are few feedback effects from the public sector while public wage leadership is typically accompanied by private sector feedback effects

learning and price discovery in a search market we introduce learning into an otherwise standard two sided search and bargaining market there is uncertainty about the price distribution due to uncertainty about an underlying exogenous state of relative demand in the high state buyers are on the long side otherwise they are on the short side in equilibrium prices are on average higher in the high state individual agents learn about the distribution while searching agents typically start out by experimenting with a tough bargaining position buyers may initially insist on a low price and sellers on a high price after successive failures to trade agents become increasingly pessimistic about the market conditions and soften their bargaining stance when frictions are small equilibrium transaction prices are approximately market clearing despite aggregate demand being unknown thus the search and bargaining procedure enables price discovery in a decentralized market

characterization of the support of the mixed strategy price equilibria in oligopolies with heterogeneous consumers abstract this paper revisits the theory of oligopoly pricing and shows that for a large class of demand and cost functions a mixed strategy equilibrium necessarily implies that each firm s equilibrium strategy is a discrete distribution over a finite number of prices

self organization and sustainability energetics of evolution and implications for ecological economics abstract in the 1920s alfred lotka suggested that evolution results both in an increasing total energy flow through the biosphere and in increasing energy efficiency of biological processes later authors attempted to generalize lotka s conjectures and to transform them into general evolutionary laws these laws are derived from the laws of thermodynamics and it is frequently argued that they also apply to the development of economic systems in the present paper an alternative interpretation of the lotka principles is suggested which starts from the self organization of dissipative structures self organization concepts from ecological and evolutionary economics are integrated on this basis energetic regularities in evolutionary processes are interpreted as emergent properties of competitive self organization given the close relationship between energy dissipation in economic processes and various environmental problems thermodynamic effects of economic evolution are of practical policy relevance the evolutionary perspective taken here implies that policy measures toward sustainable development will primarily have to affect the kinds of innovative behavior triggered in competitive processes

price dispersion in duopolies with heterogeneous consumers abstract in this paper i modify varian s varian h r 1980 a model of sales american economic review 70 4 651 659 model of sales to allow for heterogeneity in consumer preferences i show that in mixed strategy equilibria each firm charges a finite number of prices using this characterization i examine the effect of consumer heterogeneity on firms optimal pricing strategies

market and spillover forces in wage award determination in australia 1986 market and spillover forces in wage award determination in australia applied economics vol 18 no 2 pp 191 203

strategic complementarities and search market equilibrium abstract in this paper we apply supermodular game theory to the equilibrium search literature with sequential search we identify necessary and sufficient conditions for the pricing game to exhibit strategic complementarities and prove existence of equilibrium we then show that price dispersion is inherently incompatible with strategic complementarities in the sense that the diamond paradox obtains when firms are identical and is robust within the class of search cost densities that are small near zero and support strategic complementarities we also show that a major criticism of the literature that agents act as if they know the distribution of prices can be justified in the sense of convergent best response dynamics

information gatekeepers on the internet and the competitiveness of homogeneous product markets we examine the equilibrium interaction between a market for price information controlled by a gatekeeper and the homogenous product market it serves the gatekeeper charges fees to firms that advertise prices on its internet site and to consumers who access the list of advertised prices gatekeeper profits are maximized in an equilibrium where a the product market exhibits price dispersion b access fees are sufficiently low that all consumers subscribe c advertising fees exceed socially optimal levels thus inducing partial firm participation and d advertised prices are below unadvertised prices introducing the market for information has ambiguous social welfare effects

learning from trades i study stationary cut off strategy equilibria of a dynamic market model where buyers sample sellers sequentially from an unknown distribution buyers learn about the distribution from the sampled sellers and a trade signal the trade signal reveals whether a randomly chosen seller traded yesterday observing a trade as opposed to no trade is good news about the distribution buyers who observe a trade use a higher cut off than buyers who observe no trade despite buyers learning from sampled sellers that puts a countervailing pressure on the cut offs the trade signal may reduce market efficiency while an appropriate exogenous signal increases efficiency