Speaker：Dr Yucheng Ding (Wuhan University)

Time：15:00 May 18,2017(Thursday)

Site：B444

Abstract：We extend Stahl (1989) to a differentiate-product setting where each firm offers a product that meets a consumer's need with some probability. Uninformed consumers search sequentially to examine if products match their needs and to obtain price information while informed consumers purchase from the matched seller with the lowest price. In contrast to Stahl (1989), when the search cost is low, the symmetric equilibrium price distribution has a non-convex support with a high-price segment and a low-price segment. Several interesting results arise in this equilibrium: recalls may occur, sales are less likely and expected market price is higher for a lower search cost. Moreover, the expected market price and firms’ profit are maximized at some intermediate search cost if first search is costly. We also study the equilibrium outcomes if consumers observe prices before search and compare random with price-directed consumer search models.