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Equilibrium Price Dispersion

Kenneth Burdett and Kenneth L. Judd
Econometrica
Vol. 51, No. 4 (Jul., 1983), pp. 955-969
Published by: The Econometric Society
DOI: 10.2307/1912045
Stable URL: http://www.jstor.org/stable/1912045
Page Count: 15
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Equilibrium Price Dispersion
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Abstract

It 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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