We propose a novel theory of equilibrium price dispersion in product markets with search frictions. As in Diamond (1971), buyers search for sellers sequentially. In contrast to Diamond (1971), buyers do not meet all sellers with the same probability. Specifically, a fraction of the...

There are two facts about the world that we take as given: First the "law of one price" is false -- one can find many different prices for what appears to be, beyond reasonable doubt, the same good. Second, prices are set in nominal terms and appear, beyond reasonable doubt, to be sticky -- some...

In the last few decades there is a clear shift of the U.S. economy from the non-service sector to the service sector. We document the patterns of changes in the employment share in services, the transition rates of workers between the two sectors and between different employment status, the...