Buyers' Ability and Willingness to Shop Around: An Explanation for Price Dispersion

For many years, economists have observed substantial and pervasive price dispersion ? wide variations in price for the same product. Some economists have attributed price dispersion to "ignorance in the market, " a lack of information among buyers and sellers. More recently, economists at the Richmond Fed and the University of Pennsylvania have developed a model that combines price dispersion theory with intertemporal price discrimination theory to suggest that buyers' differing ability and willingness to shop around might explain price dispersion.