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Baye Morgan Scholten (2006) - Information Search and Price Dispersion (view source)
Revision as of 22:21, 25 January 2010
, 22:21, 25 January 2010no edit summary
[[Image:Two_Normals.png|thumb|right|400px|A mean preserving spread on a Normal distribution]]The Stigler model also implies that expected transaction prices will be lower when prices have the same mean but are more dispersed. There is a simple graphical proof of this. Suppose that the customer is drawing from one of the two distributions pictured - a draw from the green distribution (that has the higher variance) would be more likely to yield a lower price and have lower total costs.
These results are proved formally (as propositions 1 and 2)
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