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Baye Morgan Scholten (2006) - Information Search and Price Dispersion (view source)
Revision as of 20:38, 25 January 2010
, 20:38, 25 January 2010→Search Theoretic Models of Price Dispersion
==Search Theoretic Models of Price Dispersion==
The ''general framework '' used through-out is as follows:
*A continuum of price-setting firms with unit measure compete selling an homogenous product
*The indirect utility of consumers is:
<center><math>V(p,M) = v(p) + M\,</math></center>
<center>where <math>v(\cdot)\,</math> in nonincreasing in <math>p\,</math>, and <math>M\,</math> is income.</center>
*By [http://en.wikipedia.org/wiki/Roy%27s_identity Roy's identity]:
<center><math>q(p) \equiv -v'(p)\,</math>.</center>
<math>\frac{dM}{dp} = \frac{de(p,u)}{dp}\,</math>.
<math>\therefore q(m,p) = \frac{de(p,u)}{dp} = -\frac{\frac{dv/}{dp}}{\frac{dv(M,p)/}{dm}}\,</math>
<math>\therefore q(m,p) = -\frac{d}{dp(v(p))}\,</math>\\
