SHERP

Multiple Equilibria in a Simple Model of Search with Entry

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Authors
Dasgupta, Sugato
Issue Date
2006
Publisher
Seoul Journal of Economics
Citation
Seoul Journal of Economics 19 (No. 3 2006): 329-342
Keywords
search; maket entry; multople equilibria
Abstract
Diamond (1971) analyzed a goods market wherein identical buyers with unitary demand searched sequentially over identical monopolistically competitive firms. The equilibrium market price was shown to be the monopoly price. Suppose, now, that to participate in a "Diamond-market," prospective buyers are charged a small but positive entry fee. Since the market price fully extracts consumer surplus from entering buyers. no one finds it worthwhile to pay this entry fee. To study the non-trivial implications of consumer entry, I modify the Diamond-model slightly. The modified model displays two interesting features: buyers with strictly positive entry fees enter the goods market, and the goods market generates multiple equilibrium prices.
ISSN
1225-0279
Language
English
URI
http://hdl.handle.net/10371/1358
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College of Social Sciences (사회과학대학)Institute of Economics Research (경제연구소)Seoul Journal of EconomicsSeoul Journal of Economics vol.19(3) (Fall 2006)
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