Equilibrium Price Dispersion Across and within Stores

Abstract

We develop a search-theoretic model of the product market that generates price dispersion across and within stores. Buyers di¤er with respect to their ability to shop around, both at di¤erent stores and at di¤erent 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 induces price dispersion within stores. Speci…cally, it causes sellers to post di¤erent prices for the same good at di¤erent times in order to discriminate between di¤erent types of buyers.JEL Codes: D43.