Discussion paper

DP16268 Partially Directed Search for Prices

I analyse a model of partially directed search where searchers decide which firm to visit based on correct, but incomplete, information about firms' prices. Firms' pure strategies are allowed to be price distributions and in the unique symmetric pure-strategy equilibrium the price distributions are nondegenerate. The model's results rationalise empirical observations on promotions and changes in consumer prices: the lowest offered prices are unprofitable, the pdf of the price distribution is increasing, and the lowest prices are decreasing in the number of firms and the search cost.


Mauring, E (2021), ‘DP16268 Partially Directed Search for Prices‘, CEPR Discussion Paper No. 16268. CEPR Press, Paris & London. https://cepr.org/publications/dp16268