Price Distributions and Competition
16 Pages Posted: 23 Mar 2015
Date Written: October 2009
Considerable evidence demonstrates that significant dispersion exists in the prices charged for seemingly homogeneous goods. This paper adopts a simple, flexible equilibrium model of search to investigate the way the market structure influences price dispersion. Using the noisy search approach, the paper demonstrates the effects of having a single large, price-leading firm with multiple outlets and a competitive fringe of small firms with one retail outlet each.
Keywords: price dispersion, consumer search, market structure
JEL Classification: D40, L7
Suggested Citation: Suggested Citation