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Competitive Equilibria in Markets for Heterogeneous Goods under Imperfect Information: A Theoretical Analysis with Policy Implications

Schwartz, Alan and Wilde, Louis L. (1982) Competitive Equilibria in Markets for Heterogeneous Goods under Imperfect Information: A Theoretical Analysis with Policy Implications. Bell Journal of Economics, 13 (1). pp. 181-193. ISSN 0361-915X. http://resolver.caltech.edu/CaltechAUTHORS:20171006-110953172

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Abstract

This article characterizes necessary and sufficient conditions for heterogeneous search goods to trade at their competitive prices, and derives policy implications from these conditions. The model differs from earlier search equilibrium models in that it allows the existence of product heterogeneity. Our principal conclusions are that markets for heterogeneous search goods tend rather easily to segment into homogeneous subsets; when they do not, heterogeneity can work against the existence of competitive equilibria because it dilutes the effectiveness of search. Nevertheless, the likelihood of competitive equilibria obtaining in heterogeneous search goods markets can often be increased by reducing the costs to consumers of directly comparing purchase alternatives.


Item Type:Article
Related URLs:
URLURL TypeDescription
https://doi.org/10.2307/3003439DOIArticle
http://www.jstor.org/stable/3003439JSTORArticle
http://resolver.caltech.edu/CaltechAUTHORS:20171005-152244248Related ItemSocial Science Working Paper 381
Additional Information:This research was supported by NSF Grant No. DAR-8016066. Edward J. Green, John Ferejohn, Matthew Spitzer, and James Strnad made helpful comments on prior drafts. The article benefited substantially from a conversation with Michael Rothschild and from a presentation at the UCLA Law and Economics workshop. Also the editorial board of this journal and the referees made a number of helpful suggestions.
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NSFDAR-8016066
Record Number:CaltechAUTHORS:20171006-110953172
Persistent URL:http://resolver.caltech.edu/CaltechAUTHORS:20171006-110953172
Usage Policy:No commercial reproduction, distribution, display or performance rights in this work are provided.
ID Code:82162
Collection:CaltechAUTHORS
Deposited By: Katherine Johnson
Deposited On:06 Oct 2017 18:16
Last Modified:06 Oct 2017 18:16

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