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An Empirical Analysis of Search Costs and Price Dispersion

Avi Weiss () and Joshua Sherman ()

No 2014-06, Working Papers from Bar-Ilan University, Department of Economics

Abstract: We exploit cross-sectional and temporal differences in search intensity in order to examine the relationship between search costs and price dispersion using a hand-collected panel data set from Jerusalem’s Shuk Mahane Yehuda outdoor market. We present empirical evidence that price dispersion increases with the cost of search using several different measures of price dispersion, however, our interpretation of this finding is sensitive to the search proxy in question. We also address several acute difficulties facing empiricists seeking to test theoretical price-dispersion models in which consumers are heterogeneous in their search behavior.

JEL-codes: L11 L13 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com and nep-ind
Date: 2014-09
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