Sequentially Mixed Search and Equilibrium Price Dispersion

Many markets feature sequentially mixed search (SMS), which has directed search followed by noisy matching with multiple offers. I construct a simple model of SMS, establish existence of a unique equilibrium, and analyze the novel implications of the equilibrium on quantities and price dispersion. Moreover, I show that an increase in the meeting efficiency widens price dispersion. An extension that endogenizes search effort leads to constrained inefficiency of the equilibrium. Under a mild condition, policies that restore efficiency should lean against the wind to manage aggregate demand and supply