Searching for Service
Name
mic.20180315.pdf
Description
Published version
Size
1 MB
Format
Adobe PDF
Checksum (MD5)
ad386fb0b4bfb532912dadd9ce42b955
Author(s)
Ke, T. Tony
Date Issued
February 2020
Journal
American economic journal. Microeconomics
Publisher
American Economic Association
Citation
Janssen, Maarten C. W. and T. Tony Ke. “Searching for Service.” American economic journal. Microeconomics, 12, 1 (February 2020): 188-219 © 2020 The Author(s)
Version
Final published version
Abstract
Since Telser (1960), there is a well-established argument that a competitive market will not provide service due to freeriding. We show that with search frictions, the market may well provide service if the cost of doing so is not too large. Any market equilibrium with service provision has two or more firms providing service, implying overprovision of service as the social optimum mandates at most one service provider. Firms that provide service and those that do not can coexist, where consumers direct their search to service providers first to obtain service, and to nonservice providers later to enjoy lower prices.
MIT Department
Sloan School of Management
Terms of Use
Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
Persistent DSpace Link
DOI of Published Version
https://doi.org/10.1257/MIC.20180315
