Identification and Estimation of a Search Model: A Procurement Auction Approach

Abstract

We propose a non-sequential search model with a continuum of consumers and a finite number of firms. Both consumers and firms are heterogeneous. Consumers differ in search costs. Firms have private marginal costs of production. We show that an equilibrium price dispersion can arise in this model as firms employ a Bayesian Nash pricing strategy. We provide conditions to identify the model using price and another supply side data (such as market share). Our identification strategy is constructive. We derive the uniform rate of convergence of our estimator.