Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/86383
Authors: 
Moraga-Gonzalez, Jose Luis
Sandor, Zsolt
Wildenbeest, Matthijs R.
Year of Publication: 
2008
Series/Report no.: 
Tinbergen Institute Discussion Paper 07-102/1
Abstract: 
We study a consumer non-sequential search oligopoly model with search cost heterogeneity. We first prove that an equilibrium in mixed strategies always exists. We then examine the nonparametric identification and estimation of the costs of search. We find that the sequence of points on the support of the search cost distribution that can be identified is convergent to zero as the number of firms increases. As a result, when the econometrician has price data from only one market, the search cost distribution cannot be identified accurately at quantiles other than the lowest. To solve this pitfall, we propose to consider a richer framework where the researcher has price data from many markets with the same underlying search cost distribution. We provide conditions under which pooling the data allows for the identification of the search cost distribution at all the points of its support. We estimate the search cost density function directly by a semi-nonparametric density estimator whose parameters are chosen to maximize the joint likelihood corresponding to all the markets. A Monte Carlo study shows the advantages of the new approach and an application using a data set of online prices for memory chips is presented.
Subjects: 
consumer search
oligopoly
search costs
semi-nonparametric estimation
JEL: 
C14
D43
D83
L13
Document Type: 
Working Paper

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