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Economic Theory

, Volume 55, Issue 1, pp 101–133 | Cite as

A theory of search with deadlines and uncertain recall

Research Article

Abstract

We ask how the ability to recall past prices affects the dynamics of search and price formation. In the model, buyers have limited time to purchase a good and face uncertainty regarding the availability of past price quotes in the future. Sellers cannot observe a potential buyer’s remaining time until deadline nor her quote history, and hence post prices that weigh the probability of sale versus the profit once sold. We find that, in contrast to conventional wisdom, reducing the consumer’s recall ability may actually improve his expected utility because it lowers the average expected price in the market and reduces the duration of search.

Keywords

Equilibrium search Uncertain recall Deadlines  Price posting Reservation prices 

JEL Classification

D40 D83 

Supplementary material

199_2013_740_MOESM1_ESM.nb (1.7 mb)
ESM 1 (NB 1706 kb)

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Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  1. 1.Department of EconomicsUniversity of MiamiCoral GablesUSA
  2. 2.Department of EconomicsBrigham Young UniversityProvoUSA

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