-- this article authored by Karl Rhodes and Nicholas Trachter
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.
For centuries, economists have adhered to the law of one price, the theory that the same good should sell for the same price in all locations of a free and efficient market. But real world observations of substantial and pervasive price dispersion have contradicted this theory too often to be explained away as brief deviations from equilibrium.
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