Price dispersion ensures profits soar in unique equilibrium, impacting consumer choices.
The article explores why prices can vary for the same product. It uses a model where buyers have different costs to search for products and firms have different costs to make them. The study finds that when buyers are willing to pay different amounts and firms have varying production costs, price differences are needed for price variation. It also shows that when search costs are similar for buyers, there will be a range of prices, with some being higher and some lower. This means that there will always be a highest and lowest price possible. The study concludes that there is essentially only one main price point that companies will focus on in this situation.