The Effect of Price Dispersion on Cost of Living Indexes

Marshall Reinsdorf

International Economic Review, 1994, vol. 35, issue 1, 137-49

Abstract: Single good search models imply that mean-preserving increases in the amount of price dispersion reduce expected costs of living of searching consumers. Yet when many goods are consumed, commodity substitution may create a de facto form of fixed sample size search. This leads to the paradoxical result that an increase in price dispersion may reduce nonsearchers' average costs of living more than it does searchers' even--in the fixed sample size search case--if the searchers search only a little. Moreover, mean-and-support-preserving increases in price dispersion may make it optimal to forgo fixed sample size search. Copyright 1994 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Date: 1994
References: Add references at CitEc
Citations: View citations in EconPapers (5)

Downloads: (external link)
http://links.jstor.org/sici?sici=0020-6598%2819940 ... O%3B2-Y&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:ier:iecrev:v:35:y:1994:i:1:p:137-49

Ordering information: This journal article can be ordered from
http://www.blackwell ... bs.asp?ref=0020-6598

Access Statistics for this article

International Economic Review is currently edited by Harold L. Cole

More articles in International Economic Review from Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association 160 McNeil Building, 3718 Locust Walk, Philadelphia, PA 19104-6297. Contact information at EDIRC.
Bibliographic data for series maintained by Wiley-Blackwell Digital Licensing () and ().