IDEAS home Printed from https://ideas.repec.org/p/cla/najeco/122247000000000241.html
   My bibliography  Save this paper

Price Dispersion, Inflation and Welfare

Author

Listed:
  • Allen Head
  • Alok Kumar

Abstract

We examine the implications of inflation for both price dispersion and welfare in a monetary search economy. In our economy, if the degree of buyers' incomplete information about prices is fixed, both price dispersion and real prices are increasing in inflation. As the inflation rate approaches the Friedman rule, both price dispersion and welfare losses vanish. If households choose the number of prices to observe, then the optimal inflation rate may exceed the Friedman rule as inflation induces search and, up to a point, raises welfare by eroding market power. Copyright 2005 by the Economics Department Of The University Of Pennsylvania And Osaka University Institute Of Social And Economic Research Association.
(This abstract was borrowed from another version of this item.)

Suggested Citation

  • Allen Head & Alok Kumar, 2004. "Price Dispersion, Inflation and Welfare," NajEcon Working Paper Reviews 122247000000000241, www.najecon.org.
  • Handle: RePEc:cla:najeco:122247000000000241
    as

    Download full text from publisher

    File URL: http://www.najecon.org/v7.htm
    File Function: brief review and links to paper
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. McKelvey, Richard D & Palfrey, Thomas R, 1992. "An Experimental Study of the Centipede Game," Econometrica, Econometric Society, pages 803-836.
    2. Fehr, Ernst & Schmidt, Klaus M., . "A theory of fairness, competition, and cooperation," Chapters in Economics, University of Munich, Department of Economics.
    3. Kreps, David M. & Milgrom, Paul & Roberts, John & Wilson, Robert, 1982. "Rational cooperation in the finitely repeated prisoners' dilemma," Journal of Economic Theory, Elsevier, vol. 27(2), pages 245-252, August.
    4. Camerer, Colin & Weigelt, Keith, 1988. "Experimental Tests of a Sequential Equilibrium Reputation Model," Econometrica, Econometric Society, vol. 56(1), pages 1-36, January.
    5. Watson, Joel, 2002. "Starting Small and Commitment," Games and Economic Behavior, Elsevier, vol. 38(1), pages 176-199, January.
    6. Ernst Fehr & Klaus M. Schmidt, 1999. "A Theory of Fairness, Competition, and Cooperation," The Quarterly Journal of Economics, Oxford University Press, pages 817-868.
    7. Diamond, Douglas W, 1989. "Reputation Acquisition in Debt Markets," Journal of Political Economy, University of Chicago Press, vol. 97(4), pages 828-862, August.
    8. David K. Levine, 1998. "Modeling Altruism and Spitefulness in Experiment," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 1(3), pages 593-622, July.
    9. Andreoni, James A & Miller, John H, 1993. "Rational Cooperation in the Finitely Repeated Prisoner's Dilemma: Experimental Evidence," Economic Journal, Royal Economic Society, vol. 103(418), pages 570-585, May.
    10. Binmore, Ken, et al, 1998. "Hard Bargains and Lost Opportunities," Economic Journal, Royal Economic Society, vol. 108(450), pages 1279-1298, September.
    11. Kreps, David M. & Wilson, Robert, 1982. "Reputation and imperfect information," Journal of Economic Theory, Elsevier, pages 253-279.
    12. Milgrom, Paul & Roberts, John, 1982. "Predation, reputation, and entry deterrence," Journal of Economic Theory, Elsevier, pages 280-312.
    13. Rabin, Matthew, 1993. "Incorporating Fairness into Game Theory and Economics," American Economic Review, American Economic Association, pages 1281-1302.
    14. Camerer, Colin F. & Ho, Teck-Hua & Chong, Juin-Kuan, 2002. "Sophisticated Experience-Weighted Attraction Learning and Strategic Teaching in Repeated Games," Journal of Economic Theory, Elsevier, vol. 104(1), pages 137-188, May.
    15. Berg Joyce & Dickhaut John & McCabe Kevin, 1995. "Trust, Reciprocity, and Social History," Games and Economic Behavior, Elsevier, vol. 10(1), pages 122-142, July.
    16. James Andreoni & John Miller, 2002. "Giving According to GARP: An Experimental Test of the Consistency of Preferences for Altruism," Econometrica, Econometric Society, vol. 70(2), pages 737-753, March.
    17. Watson, Joel, 1999. "Starting Small and Renegotiation," Journal of Economic Theory, Elsevier, vol. 85(1), pages 52-90, March.
    Full references (including those not matched with items on IDEAS)

    More about this item

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:cla:najeco:122247000000000241. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David K. Levine). General contact details of provider: http://www.najecon.org/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.