Price Information and the Economics of Consumerism: A Model of Stochastic Equilibrium
A model of a quasi-competitive industry is constructed, in which the ﬁrm’s sales are described by a random variable whose expected rate of change depends on price. It is shown that a stationary (non-degenerate) distribution of prices results, so that price diﬀerences persist over time. It is further shown that, as consumers become more aware of, and responsive to, price diﬀerences between ﬁrms, the average price set by the (proﬁt maximizing) ﬁrms tends to decrease, implying a reduction in the degree of monopoly in the industry.
Sutton, John, "Price Information and the Economics of Consumerism: A Model of Stochastic Equilibrium" (1976). Cowles Foundation Discussion Papers. 669.