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On the welfare gains of price dispersion

Dutu, Richard, Benoit, Julien and King, Ian 2012, On the welfare gains of price dispersion, Journal of money, credit and banking, vol. 44, no. 5, pp. 757-786, doi: 10.1111/j.1538-4616.2012.00510.x.

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Title On the welfare gains of price dispersion
Author(s) Dutu, Richard
Benoit, Julien
King, Ian
Journal name Journal of money, credit and banking
Volume number 44
Issue number 5
Start page 757
End page 786
Total pages 10
Publisher Wiley-Blackwell Publishing, Inc.
Place of publication Hoboken, N.J.
Publication date 2012-08
ISSN 0022-2879
1538-4616
Keyword(s) price dispersion
welfare
inflation
money
search
Summary Can price dispersion be associated with higher levels of welfare? To answer we compare two economies that differ only in the way prices are formed. In the first, sellers post a unique price–quantity pair, with no price dispersion. In the second, sellers post a quantity only and let prices be determined ex post by realized demand, resulting in price dispersion. We show that while agents trade lower quantities when prices are dispersed (an intensive margin effect), they also trade more often (an extensive margin effect). At low inflation, the extensive margin dominates making agents better off with price dispersion.
Language eng
DOI 10.1111/j.1538-4616.2012.00510.x
Field of Research 140102 Macroeconomic Theory
Socio Economic Objective 970114 Expanding Knowledge in Economics
HERDC Research category C1 Refereed article in a scholarly journal
Copyright notice ©2012, Wiley-Blackwell Publishing, Inc.
Persistent URL http://hdl.handle.net/10536/DRO/DU:30047307

Document type: Journal Article
Collections: Faculty of Business and Law
Deakin Graduate School of Business
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Created: Thu, 23 Aug 2012, 12:59:48 EST by Aysun Alpyurek

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