Directed search for differentiated goods

• Main Author: Huang, Ce
• Language: English
• Published: University of British Columbia 2012
• Online Access: http://hdl.handle.net/2429/40415

In three directed search models with horizontal differentiation, this thesis characterizes the unique symmetric equilibrium for each model and studies the welfare property of equilibrium allocations. In Chapter 2, horizontal differentiation is modeled as buyers' valuations being independent. In equilibrium, sellers use a mixed strategy with the support consisting of a countable number of prices. Equilibrium price dispersion exists and equilibrium allocation is constrained inefficient due to price dispersion. Chapter 3 extends the model in Chapter 2 by allowing different degrees of horizontal differentiation. With large degrees of horizontal differentiation, sellers use a mixed strategy qualitatively similar to the equilibrium in Chapter 2. With small degrees of differentiation, sellers use a pure strategy. Chapter 4 extends the model in Chapter 2 by allowing differentiation to be endogenous. Initially buyers are equally uncertain about the characteristics of sellers' goods and no differentiation exists. Then sellers choose prices together with the amounts of information disclosed to buyers about the characteristics of sellers' goods. Information disclosure leads to differentiation after buyers receive the information. It is shown that a seller's profit by disclosing full information is higher than that by disclosing partial information. In equilibrium both sellers disclose full information and use a pricing strategy that is identical to the equilibrium in Chapter 2. === Arts, Faculty of === Vancouver School of Economics === Graduate