File(s) under permanent embargo
Inflation and quality dispersion
journal contributionposted on 2013-09-01, 00:00 authored by Richard Dutu
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.