%0 Report %A Pereira, Pedro %T Cost reduction and consumer search %J Documentos de Trabajo del Instituto Complutense de Análisis Económico (ICAE) %D 1998 %U https://hdl.handle.net/20.500.14352/64206 %X Some markets are characterized by a systematic relation between how costly it is for consumers to observe prices, market power, and incentives to reduce costs. This paper offers a model of such markets and discusses incentives to invest in cost reduction. I develop two partial equilibrium models, aue static, other dynamic, where technology is determined endogenoussly throug stochastic investment, firms set prices, entry is free and consumers search for prices. I use the static model to discuss market power and price controls and the dynamic model to discuss cost volatility and predation. %~