Search, common knowledge, and competition Kuksov, Dmitri

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Kuksov, Dmitri
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Journal of Economic Theory
Purchasing agents -- Behavior; Distributors (Commerce) -- Behavior; Economics
To link to full-text access for this article, visit this link: Byline: Dmitri Kuksov Abstract: This paper analyzes the effects of buyer search costs and seller private and common knowledge on seller competition. It shows that lack of common knowledge results in the equilibrium price continuously decreasing to the perfectly competitive one as buyer search costs for price decrease from positive for all buyers to zero for all buyers, even if each market agent's uncertainty (in the private knowledge) is small. At the same time, if the uncertainty of each seller about buyer valuations is small, the effects of a small change in the search costs or of information structure on pricing may be large (but continuous). Author Affiliation: Washington University in St. Louis, Campus Box 1133, One Brookings Drive, St. Louis, MO 63130-4899, USA Article History: Received 9 January 2004; Revised 25 February 2005
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