Missing Price Information and its Impact on Equilibrium Price Dispersion: Evidence from Gasoline Signboards Dispersion: Evidence from Gasoline Signboards

This article seeks to quantify the importance of price information in reducing consumer search costs and equilibrium price dispersion in a competitive setting. It exploits a natural experiment in the retail gasoline industry in which stations post the prices of only certain grades of gasoline on large street-side signboards, and not others, except where required by law. Differential-by-grade signboard information predicts a specific curvature in price dispersion across grades, and differentiates itself from other non-informational factors such as income and cost. The impact of readily-available price information on search and price dispersion is found to be exceptionally large.