Buyer search and price dispersion: a laboratory study

  title={Buyer search and price dispersion: a laboratory study},
  author={Timothy N. Cason and Daniel Friedman},
  journal={J. Economic Theory},
We study markets with costly buyer search in which sellers simultaneously post prices. Buyers costlessly observe one or (with probability 1 q) two of the posted prices, and can accept one or pay to search again. The experiment varies q, the search cost, and the number of buyers. Equilibrium theory predicts a unified very low (high) price for q=0 (q=1) and predicts specific distributions of dispersed prices for q=1/3 and 2/3. Actual prices conform closely to the predictions in some treatments… CONTINUE READING
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