Econometrica: May, 2012, Volume 80, Issue 3
Dynamic Competition With Random Demand and Costless Search: A Theory of Price Posting
Raymond Deneckere, James Peck
This paper studies a dynamic model of perfectly competitive price posting under demand uncertainty. Firms must produce output in advance. After observing aggregate sales in prior periods, firms post prices for their unsold output. In each period, the demand of a new batch of consumers is randomly activated. Existing customers who have not yet bought and then new customers arrive at the market in random order, observe the posted prices, and either purchase at the lowest available price or delay their purchase decision.
Supplement to "Dynamic Competition with Random Demand and Costless Search: A Theory of Price Posting"
This PDF file contains proofs for the manuscript.