Please use this identifier to cite or link to this item: 
Year of Publication: 
Series/Report no.: 
ECONtribute Discussion Paper No. 081
University of Bonn and University of Cologne, Reinhard Selten Institute (RSI), Bonn and Cologne
A buyer can either buy a good at a local monopolist or search for it in the market at a market price. The more intensely the buyer searches, the more likely he will find the good in the market, whereas if his search fails, he can still buy it from the local monopolist. We show that a buyer with a higher willingness to pay searches (weakly) more intensely. This skews the distribution of types buying at the local monopolist towards lower valuations and exerts pressure on the local monopolist to reduce his price. Despite this effect, offering the monopoly price remains weakly optimal in equilibrium: depending on the parameters, the local monopolist either chooses the monopoly price with probability one or he randomizes over a set of prices with the monopoly price as the upper bound of the support. Interestingly, a higher market price can make it more likely that the local monopolist prices below the monopoly level.
Document Type: 
Working Paper

Files in This Item:

Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.