CaltechAUTHORS
  A Caltech Library Service

Consumers Networks and Search Equilibria

Galeotti, Andrea (2005) Consumers Networks and Search Equilibria. Social Science Working Paper, 1225. California Institute of Technology , Pasadena, CA. (Unpublished) http://resolver.caltech.edu/CaltechAUTHORS:20170808-154749005

[img] PDF (SSWP 1225 - Jun. 2005) - Submitted Version
See Usage Policy.

398Kb

Use this Persistent URL to link to this item: http://resolver.caltech.edu/CaltechAUTHORS:20170808-154749005

Abstract

We explore the effect of local information sharing among consumers on market functioning. Consumers are embedded in a consumers network, they may costly search non-sequentially for price quotations and the information gathered are non-excludable along direct links. We first show that when search costs are low consumers randomize between searching for one price and two price quotations (high search intensity equilibrium). Otherwise, consumers randomize between searching for one price and not searching at all (low search intensity equilibrium). In both equilibria consumers search less frequently in denser networks. The main result of the paper shows that when search costs are low the expected price and the social welfare increase, while the consumer surplus decreases, as the consumers network becomes denser. These results are reverse when search costs are high.


Item Type:Report or Paper (Working Paper)
Additional Information:I am grateful to V. Bhaskar, K. Burdett, G. Conti, S. Goyal, M. Janssen, S. Mutuswami and J.L. Moraga-Gonzalez for useful comments on earlier versions of the paper. I also thank seminar participants at University of Essex, Caltech and ESRC Research Seminars in Game Theory-UCL.
Group:Social Science Working Papers
Subject Keywords:networks, local externalities, non-sequential search
Classification Code:JEL: D43, D83, L15
Record Number:CaltechAUTHORS:20170808-154749005
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20170808-154749005
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:79974
Collection:CaltechAUTHORS
Deposited By: Hanna Storlie
Deposited On:09 Aug 2017 18:02
Last Modified:09 Aug 2017 18:02

Repository Staff Only: item control page