Indeterminacy and directed search

Melvyn G. Coles, Jan Eeckhout

Research output: Contribution to journalArticle

Abstract

The directed search approach assumes each seller posts a fixed price and, ex post, randomly allocates the good should more than one buyer desire the good. This paper assumes sellers can post prices which are contingent on ex post realized demand; e.g. an advertisement might state the Bertrand price should there be more than one buyer, which corresponds to an auction outcome. Competition in fixed prices and ex post rationing describes equilibrium behavior. There is also real market indeterminacy: a continuum of equilibria exists which are not payoff equivalent. Sellers prefer the equilibrium in auctions.

Original languageEnglish (US)
Pages (from-to)265-276
Number of pages12
JournalJournal of Economic Theory
Volume111
Issue number2
DOIs
StatePublished - Aug 1 2003

Keywords

  • Directed search
  • Indeterminacy

ASJC Scopus subject areas

  • Economics and Econometrics

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