Price Distribution in a Symmetric Economy

Klaus Kultti 1 , 1  and Juha Virrankoski 2 , 2
  • 1 University of Helsinki, kkultti@valt.helsinki.fi
  • 2 Helsinki School of Economics, juha.virrankoski@utu.fi

We consider an economy with symmetric buyers and symmetric sellers. The sellers are in locations and post prices simultaneously. The buyers observe the prices, and each buyer visits one location. The buyers act independently and employ symmetric mixed strategies. We show that when there are several sellers in a location, the Nash equilibrium features price dispersion, i.e. the sellers post different prices. The equilibrium strategy of the sellers is a non-atomic distribution.

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The B.E. Journal of Macroeconomics publishes significant research and scholarship in theoretical and applied macroeconomics. The range of topics includes business cycle research, economic growth, and monetary economics, as well as topics drawn from the substantial areas of overlap between macroeconomics and international economics, labor economics, finance, development economics, political economy, public economics, econometric theory.

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