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Type: Conference paper
Title: Asymmetric price adjustment with costly consumer search: a laboratory study
Author: Bayer, R.
Ke, C.
Citation: Proceedings of the 38th Australian Conference of Economists, held at The University of Adelaide 28-30 September 2009.
Publisher: University of Adelaide
Publisher Place: Adelaide
Issue Date: 2009
Conference Name: Australian Conference of Economists (38th : 2009 : Adelaide, S.A.)
Statement of
Ralph-C Bayer and Changxia Ke
Abstract: Consumers usually complain that the retail gasoline price responds faster to increases in wholesale prices than to decreases. This phenomenon is emprically well established for many industries. The underlying mechanism is not well understood though. We show that asymmetric price adjustment to cost shocks occurs in experimental markets with search cost and information asymmetry, even when the standard theory predicts no adjustment at all. Analysis of individual behavior reveals that in the presence of bounded rational players, asymmetric price adjustment arises due to differences in learning speeds of buyers after positive and negative production cost shocks
RMID: 0020095449
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Appears in Collections:Economics publications

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