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 (e.g., on Monday morning) 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.
We are grateful to Ken Burdett, Greg Kaplan, Leena Rudanko and Ali Shourideh for their comments. The views expressed in this paper are those of the authors and do not necessarily represent the views of the Federal Reserve Bank of Richmond or the Federal Reserve System. The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research.
Guido Menzio & Nicholas Trachter, 2017. "Equilibrium price dispersion across and within stores," Review of Economic Dynamics, .