Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
956745 | Journal of Economic Theory | 2013 | 32 Pages |
Abstract
We study a market where each seller chooses the quality and price of goods and the number of selling sites. Observing sellersʼ choices of prices and sites, but not quality, buyers choose which site to visit. A sellerʼs choices of prices can direct buyersʼ search and signal quality. A unique equilibrium exists and is separating. When the quality differential is large, the equilibrium implements the efficient allocation with public information. Otherwise, the quality of goods and/or the number of sites created is inefficient, due to a conflict between the search-directing and signaling roles of prices.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Alain Delacroix, Shouyong Shi,