Date of Award
1987
Degree Type
Dissertation
Degree Name
Doctor of Philosophy
Abstract
The extensive literature on searching for price information deals almost exclusively with the search for the price of a single good. Since consumers would like to maximize the utility of consumption, a more general problem than minimizing the price of one good, search theory should consider the problem of searching in several markets in order to determine the robustness of conclusions derived from a theory of search in a single market.;In a model of behaviour in a single market, consumers may either accept or reject a price offer. In a model of multimarket search, consumers must also decide which market to search in, conditional on known prices. The second chapter derives optimal behaviour in each market using backward recursion. Choices can be described by independent reservation price functions in each market. Further a new rule must be introduced to analyse situations where prices are not jointly acceptable. These rules generate distributions of accepted prices in each market which are not statistically independent, in general.;The third chapter uses this model to explain price dispersion in consumer-firm equilibrium with goods which are gross substitutes of one another and all consumers facing positive marginal search costs. Identical firms earn equal expected profits even when they offer different prices because firms offering lower prices will tend to have more customers and those customers will tend to accept higher prices in the other market. Since these goods are substitutes, these forces combine to increase sales and profits of low priced firms.;The fourth chapter considers the measurement and interpretation of cost-of-living indices. We construct an expected cost-of-living index which incorporates the search costs necessary to obtain goods at an acceptable price and the uncertainty about which prices will be accepted. We argue that traditional indices do not incorporate the fact that accepted prices in one market depend on prices in other markets nor the fact that the goods offered within each market are identical in this model.
Recommended Citation
Anglin, Paul Murray, "Multimarket Search" (1987). Digitized Theses. 1569.
https://ir.lib.uwo.ca/digitizedtheses/1569