TY  - GEN
TI  - The dynamic instability of dispersed price equilibria
AV  - public
Y1  - 2007/08//
CY  - London, UK
A1  - Lahkar, R.
T3  - ELSE Working Papers
ID  - discovery14430
N2  - 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.
PB  - ESRC Centre for Economic Learning and Social Evolution
UR  - http://else.econ.ucl.ac.uk/newweb/papers.php#2007
ER  -