Quality and Price Dispersion in an Equilibrium Search Model
Sometimes homogenous goods trade at different qualities trade at the same price. This paper analyses such deviations from the “Law of One Quality-One Price” within the framework of an equilibrium search model. In equilibrium, consumers’ searching strategy and firms’ price-quality optimal choice are mutually consistent. Non-degenerated equilibrium price and/or quality distributions emerge, in keeping with the proportion of expert consumers in total consumer population.
VRANCEANU, R. et BESANCENOT, D. (2004). Quality and Price Dispersion in an Equilibrium Search Model. Journal of Economics and Business, pp. 99-116.