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How Increasing Supplier Search Cost Can Increase Welfare

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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https://halshs.archives-ouvertes.fr/halshs-01806502
Contributor : Anne l'Azou <>
Submitted on : Sunday, June 3, 2018 - 10:23:20 AM
Last modification on : Sunday, January 12, 2020 - 10:19:36 PM

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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, De Gruyter, 2017, 18 (1), pp.online review. ⟨10.1515/bejte-2016-0048⟩. ⟨halshs-01806502⟩

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