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Journal Articles B.E. Journal in Theoretical Economics, Topics in Theoretical Economics Year : 2017

How Increasing Supplier Search Cost Can Increase Welfare

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Abstract

Reductions in search costs are generally found to increase efficiency and welfare. Using a simple search model we show that when an upstream firm incurs a search cost to identify a potential trading partner and the two parties then negotiate the wholesale price, a reduction in search cost can actually reduce welfare. Furthermore, in a market driven by seller search, a search cost of zero is never socially optimal.
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Dates and versions

halshs-01806502 , version 1 (03-06-2018)

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Zhiwen Li, Michael Arnold, Thierry Pénard. How Increasing Supplier Search Cost Can Increase Welfare. B.E. Journal in Theoretical Economics, Topics in Theoretical Economics, 2017, 18 (1), pp.online review. ⟨10.1515/bejte-2016-0048⟩. ⟨halshs-01806502⟩
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