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INFLATION AND QUALITY DISPERSION
Published online by Cambridge University Press: 29 August 2012
Abstract
One questionable aspect of price posting with directed search is the strong commitment by sellers to commit to the advertised terms of trade. In this paper I explore the welfare implications of assuming that sellers cannot commit and vary the quality of their output ex post according to realized demand. I show that such lack of commitment translates into lower participation by buyers, lower average quality, and a consumption-equivalent loss of 0.3% of annual GDP.
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- Macroeconomic Dynamics , Volume 17 , Special Issue 6: Equality, Public Insurance, and Monetary Policy , September 2013 , pp. 1355 - 1365
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- Copyright © Cambridge University Press 2012
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