Consumer search, productivity heterogeneity, prices, markups, and pass-through : theory and estimation / by Alex Chernoff, Allen Head and Beverly Lapham. : FB3-5/2024-50E-PDF

"We develop and estimate a search model in which identical consumers trade with price-setting firms that differ in productivity. In the model, equilibrium distributions of both prices and markups are non-degenerate and continuous with a firm’s price decreasing as its productivity increases. Variation in markups across firms is more complicated and depends on the search process and the distribution of productivity, both of which are estimated using firm-level data on retail industries in Canada. We use the estimated model to characterize the qualitative and quantitative differences in prices and markups across firms"--Abstract, page ii.

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