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Inflation And Quality Dispersion

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  • Dutu, Richard

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.

Suggested Citation

  • Dutu, Richard, 2013. "Inflation And Quality Dispersion," Macroeconomic Dynamics, Cambridge University Press, vol. 17(6), pages 1355-1365, September.
    • Handle: RePEc:cup:macdyn:v:17:y:2013:i:06:p:1355-1365_00
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