Anmerkungen:
Nach Informationen von SSRN wurde die ursprüngliche Fassung des Dokuments March 30, 2021 erstellt
Beschreibung:
This paper develops a dynamic model of price competition where buyers have constrained consideration sets due to unawareness. Awareness evolves over time and is influenced by word-of-mouth: if more buyers choose to shop at one seller, then unaware buyers are more likely to discover that seller. There are two sellers: an Incumbent, who is initially more well known among buyers, and an Entrant. In the unique equilibrium, both sellers randomize their pricing strategies, but one seller posts higher expected prices than the other. If the Incumbent's present actions change the future equilibrium path to a large enough degree then it has a strong incentive to undercut the Entrant to reduce the growth of buyers' awareness regarding the Entrant. Thus, this model provides microfoundations to the concept of advantage denying motive and relate it to the empirical finding that it takes time for a seller's demand to grow