SFB 303 Discussion Paper No. A - 53

Author: Berninghaus, Siegfried
Title: On Price Adjustment Processes in Economies with Incompletely Informed Market Participants
Abstract: Consumers are supposed to be incompletely informed about the dispersion of prices prevailing on the market in each period. Firms are supposed to be incompletely informed about the distribution of their own firm- specific demand functions. In a rather general setting where firms are gathering information by setting prices according to the Multi-armed bandit paradigm and consumers are applying a general price search rule it will be demonstrated that the resulting process of price dispersions converges (in a well defined sense) to a stochastic equilibrium.
Creation-Date: February 1986
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