We analyse a model of oligopolistic competition in which consumers search without priors. Consumers do not have prior beliefs about the distribution of prices charged by firms and thus try to use a robust search procedure. We show that the optimal stopping rule is stochastic and that for any distribution of search costs there is a unique market equilibrium which is characterised by price dispersion. Although listed prices approach the monopoly price as the number of firms increases, the effective price paid by consumers does not depend on the number of firms.
In this article, I examine a model of oligopolistic competition in which consumers search for prices but have no knowledge of the underlying price distribution. The consumers' behaviour satisfies four consistency requirements and, as a result, their beliefs about the underlying distribution maximise Shannon entropy. I derive the optimal stopping rule and equilibrium price distribution of the model. Unlike in Stahl (1989), the expected price is decreasing in the number of firms. Moreover, consumers can benefit from being uninformed, if the number of firms is sufficiently large.