ICEF Research Seminar
On March 4th Maarten Janssen delivered a presentation on ‘Oligopolistic Markets with Sequential Search and Asymmetric Information’at the HSE International College of Economics and Finance Research Seminar. You can watch a video of the event here.
On March 4th a research seminar of the International College of Economics and Finance took place at the HSE. Maarten Janssen, University of Vienna, presented his report on ‘Oligopolistic Markets with Sequential Search and Asymmetric Information'.
A large variety of markets, such as retail markets for gasoline or mortgage markets, are characterized by firms offering a fairly homogenous product at virtually the same cost. The present paper provides a theoretical examination of this type of market by developing a sequential search model with incomplete information where consumers are uninformed about the underlying production cost. We characterize a perfect Bayesian equilibrium in which consumers follow reservation price strategies and provide a sufficient condition when such an equilibrium exists. Firms strategically exploit consumers being uninformed about their production cost, and set on average higher prices compared to the standard complete information model. The importance of asymmetric information vanishes, however, when the number of firms becomes very large. Further, we find that expected prices and consumer welfare might be non-monotonic in the number of firms.
Video of Maarten Janssen’s report