Incomplete Search, Price Dispersion and Multiple Production Technologies

Abstract

This paper shows that the incomplete consumer search will allow multiple production technologies to coexist in the same market, with different equilibrium prices for homogeneous products across firms. This study extends the work of Sadanand and Wilde in two directions: (1) firms are allowed to produce one homogeneous good with different production technologies and (2) consumers' shopping behavior allows non-random sampling strategies. This paper also shows that consumers' search for lower prices will enhance social welfare