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Buyers' Ability and Willingness to Shop Around: An Explanation for Price Dispersion

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  • Karl Rhodes
  • Nicholas Trachter

Abstract

For many years, economists have observed substantial and pervasive price dispersion ? wide variations in price for the same product. Some economists have attributed price dispersion to "ignorance in the market," a lack of information among buyers and sellers. More recently, economists at the Richmond Fed and the University of Pennsylvania have developed a model that combines price dispersion theory with intertemporal price discrimination theory to suggest that buyers' differing ability and willingness to shop around might explain price dispersion.

Suggested Citation

  • Karl Rhodes & Nicholas Trachter, 2015. "Buyers' Ability and Willingness to Shop Around: An Explanation for Price Dispersion," Richmond Fed Economic Brief, Federal Reserve Bank of Richmond, issue July.
    • Handle: RePEc:fip:fedreb:00030
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