"Equilibrium Price Dispersion Across and Within Stores"

We develop a search-theoretic model of the product market that generates price dispersion across and within stores. Buyers differ with respect to their ability to shop around, both at different stores and at different times. The fact that some buyers can shop from only one seller while others can shop from multiple sellers causes price dispersion across stores. The fact that the buyers who can shop from multiple sellers are more likely to be able to shop at inconvenient times induces causes price dispersion within stores. Specifically, it causes sellers to post different prices for the same good at different times in order to discriminate between different types of buyers.

Information

Paper Number: 15-003

Paper Year: 2015

Authors:

Guido Menzio
Nicholas Trachter