Hostname: page-component-74656f9884-g96k6 Total loading time: 0 Render date: 2026-11-10T10:06:02.349Z Has data issue: false hasContentIssue false
  • English
  • Français

INFLATION AND QUALITY DISPERSION

Published online by Cambridge University Press:  29 August 2012

Richard Dutu
Richard Dutu*
Affiliation:
World Bank and Deakin Graduate School of Business
*
Address correspondence to: Richard Dutu, Deakin Graduate School of Business, 221 Burwood Highway, 3125 Burwood, Victoria, Australia; e-mail: rdutu@deakin.edu.au.
Rights & Permissions [Opens in a new window]

Abstract

Core share and HTML view are not available for this content. However, as you have access to this content, a full PDF is available via the 'Save PDF' action button.

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.

Keywords

Directed SearchCommitmentQualityWelfare

Information

Type
Articles
Information
Macroeconomic Dynamics , Volume 17 , Special Issue 6: Equality, Public Insurance, and Monetary Policy , September 2013 , pp. 1355 - 1365
Copyright
Copyright © Cambridge University Press 2012 

References

REFERENCES

Bils, Mark (2009) Do higher prices for new goods reflect quality growth or inflation? Quarterly Journal of Economics 124 (2), 637–675.CrossRefGoogle Scholar
Bils, Mark and Klenow, Peter J. (2001) Quantifying quality growth. American Economic Review 91 (4), 1006–1030.CrossRefGoogle Scholar
Burdett, Kenneth, Shi, Shouyong, and Wright, Randall (2001) Pricing and matching with frictions. Journal of Political Economy 109 (5), 1060–1085.CrossRefGoogle Scholar
Coles, Melvyn and Eeckhout, Jan (2003) Indeterminacy and directed search. Journal of Economic Theory 111, 265–276.CrossRefGoogle Scholar
Craig, Ben and Rocheteau, Guillaume (2008) Inflation and welfare: A search approach. Journal of Money, Credit and Banking 40 (1), 89–119.CrossRefGoogle Scholar
Julien, Benoit, Kennes, John, and King, Ian (2008) Bidding for money. Journal of Economic Theory 142, 196–217.CrossRefGoogle Scholar
Lagos, Ricardo and Wright, Randall (2005) A unified framework for monetary theory and policy analysis. Journal of Political Economy 113 (3), 463–484.CrossRefGoogle Scholar
Lucas, Robert E. Jr., (1987) Models of Business Cycles. New York: Basil Blackwell.Google Scholar
Moen, Espen R. (1997) Competitive search equilibrium. Journal of Political Economy 105 (2), 385–411.CrossRefGoogle Scholar
Rocheteau, Guillaume and Wright, Randall (2005) Money in search equilibrium, in competitive equilibrium, and in competitive search equilibrium. Econometrica 73, 175–202.CrossRefGoogle Scholar
Rogerson, Richard, Shimer, Robert, and Wright, Randall (2005) Search-theoretic models of the labour market: A survey. Journal of Economic Literature 63, 959–988.CrossRefGoogle Scholar
Shi, Shouyong(2008) Search theory: Current perspectives. In Durlauf, Steven N. and Blume, Lawrence E. (eds.), New Palgrave Dictionary of Economics, 2nd ed.Palgrave Macmillan.Google Scholar