Econometrica: Jul 1983, Volume 51, Issue 4
Equilibrium Price Dispersion
Kenneth Burdett, Kenneth L. JuddIt is shown that wquilibria with dispersed prices exist in environments with identical and rational agents on both sides of the market. In particular, the original Stigler model of nonsequential search often has many equilibria, some with price dispersion. Also, price dispersion holds in equilibrium in general if search is "noisy," i.e., there is some chance of learning two or more prices when an agent is looking for one price.
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