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An experimental comparison of two search models

Lookup NU author(s): Dr Martin Sefton

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Abstract

We report an experiment designed to investigate markets with consumer search costs. In markets where buyers are matched with one seller at a time, sellers are predicted to sell at prices equal to buyers' valuations. However, we find sellers post prices that offer a more equal division of the surplus, and these prices tend to be accepted, while prices closer to the equilibrium prediction are rejected. At the other extreme, sellers are predicted to sell at a price equal to marginal cost when buyers are matched with two sellers at a time. Here, we find prices are closer to, but still significantly different from, the equilibrium prediction. Thus, our results support theoretical comparative static, but not point, predictions.

Publication metadata

Author(s): Abrams E, Sefton M, Yavas A

Publication type: Article

Publication status: Published

Journal: Economic Theory

Year: 2000

Volume: 16

Issue: 3

Pages: 735-749

Print publication date: 01/01/2000

ISSN (print): 0938-2259

ISSN (electronic): 1432-0479

Publisher: Springer

URL: http://dx.doi.org/10.1007/s001990050012

DOI: 10.1007/s001990050012

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