Simulation of customers behaviour as a method for explaining certain market characteristic

Abstract

Price dispersion is an observed variation of price of the same (or similar) product among different sellers. This paper provides a possible explanation of the observed shape of the dispersion, proven by simulations of an agent based customer-seller environment. Proposed models for both seller and customer, based on current marketing knowledge are included. It turns out that the observed shape is achieved when some key factors influencing customers' buying behaviour are taken into account; e.g. the social context, communication, a limited memory of a customer and the cost of crossing the distance between agents. As a benefit of the proposed model, it allows for speculation on how the future commerce may look like - in an Internet world where distances matter little. © 2013 Springer-Verlag.