How Increasing Supplier Search Cost Can Increase Welfare

Zhiwen Li; Michael Arnold; Thierry Pénard

doi:10.1515/bejte-2016-0048

Journal articles

How Increasing Supplier Search Cost Can Increase Welfare

Zhiwen Li ¹ Michael Arnold ² Thierry Pénard ³

1 School of management Jiangsu University

2 Alfred Lerner College of Business and Economics

3 CREM - Centre de recherche en économie et management

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.

Keywords : social welfare sequential search Nash bargaining search cost

Document type :

Journal articles

Domain :

Humanities and Social Sciences / Economics and Finance

Humanities and Social Sciences / Business administration

Complete list of metadatas

https://halshs.archives-ouvertes.fr/halshs-01806502
Contributor : Naïla Louise-Rose <>
Submitted on : Sunday, June 3, 2018 - 10:23:20 AM
Last modification on : Thursday, January 14, 2021 - 1:21:16 PM

How Increasing Supplier Search Cost Can Increase Welfare

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How Increasing Supplier Search Cost Can Increase Welfare

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