Department of Economics

Faculty of Arts and Social Sciences

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2013 Asia Summer Institute in Behavioral Economics
Asian Meeting of the Econometric Society 2013
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Department Seminar

Topic: Consumer Search with Price Sorting

Speaker:

Jun Yu
Shanghai University of Finance and Economics

Date: June 30, Tuesday

Time: 4 - 5:30 pm

Venue: Lim Tay Boh Seminar Room (AS2 03-12)
National University of Singapore
1 Arts Link, Singapore 117570


Chair: Chen Yi-Chun

Abstract:

This paper introduces price sorting into a consumer search model.  Either ascending or descending price sorting can be applied before the sampling process.  Consumers search sequentially for products with two types of qualities.  We allow a fraction of consumers to have zero search costs, and all other consumers have the same positive search cost.  Price dispersion exists in the unique symmetric equilibrium.  We find that, when the search cost is small, using price sorting will improve both total welfare and consumer surplus, but have no impact on industry profits.  Moreover, if consumers can choose the type of price sorting for their own interests, ascending price sorting (or descending price sorting, respectively) will be chosen if there are more high-quality products (or low-quality products, respectively) in the market.