In markets with search frictions, consumers can acquire information about goods either through costly search or from … price information. If acquiring price quotes is costly, equilibrium prices are dispersed and the expected price is higher … than the marginal cost of production. This implies that firms retain market power even if price information is disseminated …

Consumers can acquire information through their own search efforts or through their social network. Information … diffusion via word-of-mouth communication leads to some consumers free-riding on their “friends” and less information … becomes small, price dispersion disappears, while the price level converges to the monopoly level, implying that expected …