A Model of search price Dispersion Let us consider an economy with a continuum of consumers, indexed by s on the interval [L, h according to their cost for going shopping, where we assume that H>3L>0. Thus, consumers indexed by a high s(s close to H) are high time-valued consumers, whose cost of searching for the lowest price is high. The consumers indexed by a low s(s close to L) are low time-valued consumers for whom the cost of going shopping and searching for the lowest price is small. Figure 16. 1 illustrates how consumers are distributed according to their cost of shopping There are three stores selling a single product that is produced at zero cost. One store, denoted by d is called discount store, selling the product for a unit price of pn. The other two stores, denoted by ND, are expensive(not discount)stores, and are managed by a single ownership that sets a uniform price, PNp, for the two nondiscount stores Searching Buying at random O L H Figure 16 Consumers with variable search cost searching for the lowest price fine p to be the average product price. Formally, PD+ 2pND (161A Model of Search & Price Dispersion