learning

Can Consumers Learn Price Dispersion? Evidence for Dispersion Spillover across Categories

Should I search for a better price? Should I accept this job offer? To answer those questions, consumers form beliefs about the dispersion of prices or salaries... but how accurate are those beliefs? We provide evidence for a phenomenon we call dispersion spillover: Seeing more (vs. less) dispersed prices in one category leads people to perceive more price dispersion in another category. This dispersion spillover influences consumers’ judgments of price attractiveness and changes their likelihood to search for (and find) better options.