Search less for a better price

Abstract

In many markets, sellers must spend resources to learn the costs of providing goods/services. This paper considers consumer searches in such markets. The findings show that: (i) even with ex ante identical consumers and sellers, there is price dispersion in the equilibrium, (ii) despite price dispersion and minimal search costs, it could be optimal to search just two sellers and (iii) the optimal number of searches can increase with sellers' information costs.