Search Costs and Price Dispersion in a Localized, Homogeneous Product Market: Some Empirical Evidence

Abstract

Convenience stores provide an opportunity to compare the price dispersion that occurs for gasoline, which is characterized by relatively low search and information costs to consumers, with that of in-store items, which are characterized by relatively high search and information costs to consumers. The results obtained from this study support the hypothesis that differences in search and information costs for consumers play a significant role in explaining the observed price dispersion that occurs for homogeneous items sold at convenience stores.