The Stability of Price Dispersion under Seller and Consumer Learning

Ed Hopkins, Robert M Seymour

Research output: Working paperDiscussion paper

Abstract / Description of output

In many markets it is possible to find rival sellers charging different prices for the same good. Earlier research has attempted to explain this phenomenon by demonstrating the existence of dispersed price equilibria when consumers must make use of costly search to discover prices. We ask whether such equilibria can be learnt when sellers adjust proces adaptively in response to current market conditions. With consumer behaviour fixed, convergence to a dispersed porce equilibrium is possible in some cases. However, once consumer learning is introduced, the monopoly outcome first found by Diamond (1971) is the only stable equilibrium.
Original languageEnglish
PublisherEdinburgh School of Economics, University of Edinburgh
Publication statusPublished - 2004

Publication series

NameESE Discussion Papers


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