Searching for the Lowest Price

COMPETITION AMONG SELLERS WILL INCLUDE PROVISION FOR SUPPLYING POTENTIAL BUYERS WITH INFORMATION ON THE TERMS OF SALE A LOW COST TO THE CUSTOMERS. THIS HAS SEVERAL IMPLICATIONS. FIRST, SELLERS HAVE AN INCENTIVE TO STANDARDIZE, BRAND, AND ADVERTISE THEIR PRODUCTS. THIS TENDS TO LOWER THE COST OF SEARCH FOR BUYERS. 2ND SELLERS WILL ATTEMPT TO ESTTABLISH A REPUTATION FOR A GIVEN PRICE RANGE AND TYPE OF SERVICE. THIS REDUCES THE DEPRECIATION RATE OF THE BUYERS STOCK OF KNOWLEDGE ABOUT THE TERMS OF SALE WHICH RAISES THE THE RATE-OF-RETURN OF SEARCH FOR A GIVEN COST OF SEARCH. IT IS IN THE INTEREST OF THE RETAILER TO OFFER SUCH ATTRACTIVE TERMS OF SALE AS WILL CEMENT THE LOYALTY OF HIS CUSTOMERS. YET, TO KEEP THIS LOYALTY THE RETAILER MUST MAINTAIN HIS PRICE LEVEL RELATIVE TO HIS COMPETITION.