Why do two gas stations across the street often charge different prices? Why does your bank give you a great deal at first, then raise fees later? The answer comes from two simple ideas: it takes effort to search for a better price, and switching to a new seller is rarely free. In this chapter we see how these frictions shape markets. They let firms charge more than the “perfect competition” model predicts and create a world where prices vary, instead of being the same everywhere.