The Consequences of Price Instability on Search Markets: Toward Understanding the Effects of Inflation

Mariano Tommasi

American Economic Review, 1994, vol. 84, issue 5, 1385-96

Abstract: Real price variability depreciates the information about future prices contained in current ones. Repeat-purchase customers have, then, less incentive to acquire price information. The fact that consumers are less well informed allows firms to increase their markups and permits inefficient producers to increase their sales. Production gets reallocated toward higher-cost firms. Given the well-documented correlation between inflation and relative price variability, these results help explain some of the costs of inflation. Copyright 1994 by American Economic Association.

Date: 1994
References: Add references at CitEc
Citations: View citations in EconPapers (34)

Downloads: (external link)
http://links.jstor.org/sici?sici=0002-8282%2819941 ... O%3B2-W&origin=repec full text (application/pdf)
Access to full text is restricted to JSTOR subscribers. See http://www.jstor.org for details.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:aea:aecrev:v:84:y:1994:i:5:p:1385-96

Ordering information: This journal article can be ordered from
https://www.aeaweb.org/journals/subscriptions

Access Statistics for this article

American Economic Review is currently edited by Esther Duflo

More articles in American Economic Review from American Economic Association Contact information at EDIRC.
Bibliographic data for series maintained by Michael P. Albert ().