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Price Dynamics in Repeat-Purchase Markets


Sibly, HA, Price Dynamics in Repeat-Purchase Markets, Economic Record, 71, (213) pp. 179-190. ISSN 0013-0249 (1995) [Refereed Article]

DOI: doi:10.1111/j.1475-4932.1995.tb01884.x


A retail market in which customers repeat purchase is modelled. When customer movement between firms is sluggish, price overshooting characterizes firms' optimal response to demand or cost shocks. Thus retail prices would be predicted to be more variable than wholesale prices, a prediction at variance with empirical evidence. Uncertainty in demand and customer imperfect information are introduced into the model to attempt to reconcile this inconsistency between theory and evidence. The introduction of demand uncertainty actually increases the magnitude of price overshooting. By contrast, the introduction of imperfect customer information reduces the variability in retail prices. Copyright © 1995, Wiley Blackwell. All rights reserved

Item Details

Item Type:Refereed Article
Research Division:Economics
Research Group:Economic theory
Research Field:Economic theory not elsewhere classified
Objective Division:Economic Framework
Objective Group:Microeconomics
Objective Field:Microeconomics not elsewhere classified
UTAS Author:Sibly, HA (Dr Hugh Sibly)
ID Code:5908
Year Published:1995
Deposited By:Economics and Finance
Deposited On:1995-08-01
Last Modified:2011-08-25

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