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A theory of stable price dispersion

Abstract:
We propose a two-stage replacement for established “clearinghouse" or “captive and shopper" pricing models: second-stage retail prices are constrained by first-stage list prices. In contrast to the mixed-strategy equilibria of single-stage games, a unique profile of distinct prices is supported by the play of pure strategies along the equilibrium path, and so we predict stable price dispersion. We find novel results in applications to models of sales, product prominence, advertising, and consumer search.
Publication status:
Published

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Institution:
University of Oxford
Division:
SSD
Department:
Economics
Role:
Author
Publisher:
University of Oxford
Series:
Department of Economics Discussion Paper Series
Article number:
873
Publication date:
2019-10-01
Paper number:
873
Language:
English
Keywords:
Pubs id:
1179237
Local pid:
pubs:1179237
Deposit date:
2021-05-28

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