Equilibrium Price Dispersion

Homogenous Agent Wage-Posting Model with Wage Dispersion

“…Except for the original model, other wage curves 1,t w and 2,t w of employer 1 and 2 do not equal along the whole time interval, 1, 2,...,100 t = . The finding is similar to Burdett and Judd (1983) who show that the price (wage) dispersion may exist in the case of homogenous agents provided that some "noise" is introduced into the sequential search technology. …”

“…2 We test the effects of such intrinsic costs by introducing a stochastic factor, a "noise", into the original Montgomery model that affects the decision-making (wage policy) of employers. Then, even the homogeneous-agent model may lead to wage dispersion, something that is not possible in the original Montgomery model, but has been modeled within the framework of Burdett and Judd (1983).…”

Price Dispersion When Stores Sell Multiple Goods

“…The model is a variation of Burdett and Judd (1983), which is the workhorse model to explain equilibrium price dispersion across stores selling a single homogeneous good. In KMRT, the model is extended to allow for multiple goods (in particular, two goods) and to allow for heterogeneity in customer shopping behavior.…”

“…A large fraction of the literature on search frictions dwells with models of product markets where, for one reason or another, customers face a cost to act in the market (i.e., pay a search or switching cost to switch stores, pay a cost to learn a set of prices, etc.). A well-known result in a large class of models (based on the seminal work of Burdett and Judd [1983]) is that price dispersion for identical goods arises in equilibrium.The empirical evidence on price dispersion for product marketsa good measure of the extent of the friction, as there should be no price dispersion for homogeneous goods in a Walrasian market -is large, mostly documenting dispersion for particular goods in retail markets. The literature abstracts from several important features of retail markets.…”

“…A large fraction of the literature on search frictions dwells with models of product markets where, for one reason or another, customers face a cost to act in the market (i.e., pay a search or switching cost to switch stores, pay a cost to learn a set of prices, etc.). A well-known result in a large class of models (based on the seminal work of Burdett and Judd [1983]) is that price dispersion for identical goods arises in equilibrium.…”