%0 Generic
%A Lahkar, R.
%C London, UK
%D 2007
%F discovery:14430
%I ESRC Centre for Economic Learning and Social Evolution
%N 269
%T The dynamic instability of dispersed price equilibria
%U https://discovery.ucl.ac.uk/id/eprint/14430/
%X We examine whether price dispersion is an equilibrium phenomenon or a cyclical phenomenon.  We develop a finite strategy model of price dispersion based on the infinite strategy  model of Burdett and Judd (1983). Adopting an evolutionary standpoint, we examine the stability  of dispersed price equilibrium under perturbed best response dynamics. We conclude that  when both sellers and consumers participate actively in the market, all dispersed price equilibria  are unstable leading us to interpret price dispersion as a cyclical process. For a particular case  of the model, we prove the existence of a limit cycle.