Price setting, price dispersion, and the value of money: or, the law of two prices
We study models that combine search, monetary exchange, price posting by sellers, and buyers with preferences that differ across random meetings - say, because sellers in different meetings produce different varieties of the same good. We show how these features interact to influence the price level (i.e., the value of money) and price dispersion. First, price-posting equilibria exist with valued fiat currency, which is not true in the standard model. Second, although both are possible, price dispersion is more common than a single price. Third, perhaps surprisingly, we prove generically there cannot be more than two prices in equilibrium.
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- Edward J. Green & Ruilin Zhou, "undated".
"A Rudimentary Model of Search with Divisible Money and Prices,"
Penn CARESS Working Papers
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- Edward J. Green & Ruilin Zhou, "undated". ""A Rudimentary Model of Search with Divisible Money and Prices''," CARESS Working Papres 95-17, University of Pennsylvania Center for Analytic Research and Economics in the Social Sciences.
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98-03, University of Iowa, Department of Economics.
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- Ruilin Zhou, 1996.
"Individual and aggregate real balances in a random matching model,"
222, Federal Reserve Bank of Minneapolis.
- Zhou, Ruilin, 1999. "Individual and Aggregate Real Balances in a Random-Matching Model," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 40(4), pages 1009-1038, November.
- Ruilin Zhou, 1996. "Individual and Aggregate Real Balances in a Random Matching Model," GE, Growth, Math methods 9612001, EconWPA, revised 23 Dec 1996.
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404, Massachusetts Institute of Technology (MIT), Department of Economics.
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916, Queen's University, Department of Economics.
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- Miquel Faig, 2001.
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567, Department of Economics and Business, Universitat Pompeu Fabra.
- Miquel Faig, 2001. "A Search Theory of Money and Commerce with Neoclassical Production," Working Papers faig-01-01, University of Toronto, Department of Economics.
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