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ON FRUITFUL AND FUTILE TESTS OF THE RELATIONSHIP BETWEEN SEARCH AND PRICE DISPERSION
Author(s) -
Sherman Joshua,
Weiss Avi
Publication year - 2017
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/ecin.12449
Subject(s) - price dispersion , economics , proxy (statistics) , search cost , dispersion (optics) , econometrics , exploit , set (abstract data type) , microeconomics , order (exchange) , panel data , interpretation (philosophy) , computer science , statistics , mathematics , finance , programming language , physics , computer security , optics
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 L11, L13)