Price dispersion occurs when different sellers offer different prices for the same good. Empirical studies have identified price dispersion as widespread and persistent. The most frequent explanation for this is that consumers do not have perfect information about prices. Only recently have economists succeeded in modelling price dispersion as an equilibrium phenomenon: that is, where consumers’ decisions to acquire price information are a best response to the distribution of prices, and sellers’ pricing decisions are a best response to consumers’ search behaviour.
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