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12.12. BGSE Micro Workshop: Tobit Gamp

BGSE Micro Workshop with Tobit Gamp (University College London)

Event details
  • BGSE Workshop
When Dec 12, 2018
from 12:00 to 13:00
Where room 0.017
Contact Name Stephan Lauermann
Contact Email
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 Cursed Beliefs in Search Markets



We study a search market in which some consumers are cursed and neglect correlations. We show that, in equilibrium, cursed consumers have unrealistic high expectations about what the market supplies so that they engage in excessive search. As a consequence, the ''Diamond-Paradox'' breaks down. Instead, if search costs are low, there are Stahl-like equilibria in which cursed consumer never stop searching for the ''golden egg'' which they falsely believe to exist. As a consequence, they might be better of if search costs are in an intermediate range when a novel type of equilibrium emerges in which firms offer ''super sales'' in order to meet the unreasonable high expectations of cursed consumers.



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