The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Price Dispersion

  • Ed Hopkins
Reference work entry
DOI: https://doi.org/10.1057/978-1-349-95189-5_1976

Abstract

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.

Keywords

Clearinghouse models Price discrimination Price dispersion Sequential search 

JEL Classifications

C7 D8 
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Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Ed Hopkins
    • 1
  1. 1.