Money and price dispersion

We relax restrictions on the storage technology in a prototypical monetary search model to study price dispersion. In this case, buyers and sellers en ter matches with potentially different willingness to trade. Across the dis tribution of possible bilateral matches, prices generally will differ even though agents have identical preferences and technologies. We provide exist ence conditions for a particularly simple equilibrium pattern of exchange. We prove that in the limiting case where search frictions are eliminated, e quilibrium prices are uniform. We also show that a higher initial money sto ck can raise the average price level and increase price dispersion.