A Theory of Commerce
AbstractThe theory of commerce advanced here captures prominent features of retail trade: large employment, congestion effects, anonymous posted prices, and quantity discounts. This theory is built around a directed search model where buyers’ preferences are private information. The analytical solution is easily inserted in a Neoclassical growth framework. In this framework, the parameters of retail trade are calibrated using commercial margins and employment. Welfare properties depend on the sellers’ ability to charge two-tier prices. With two-tier prices, the directed search equilibrium is efficient. Otherwise, it is not. This contrasts with the full information benchmark, where directed search is always efficient.
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Bibliographic InfoPaper provided by Universidad Carlos III de Madrid in its series Open Access publications from Universidad Carlos III de Madrid with number info:hdl:10016/5318.
Length: 101 p.
Date of creation: 2005
Date of revision:
Publication status: Published in Journal of Economic Theory (2005) v. 122, p.60-99
Contact details of provider:
Web page: http://www.uc3m.es
Retail trade; Directed search; Ex ante price offers; Private information;
Other versions of this item:
- D43 - Microeconomics - - Market Structure and Pricing - - - Oligopoly and Other Forms of Market Imperfection
- D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
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