Price Heterogeneity as a Source of Heterogeneous Demand

John Quah and Gerelt Tserenjigmid ()

Papers from arXiv.org

Abstract: We explore heterogeneous prices as a source of heterogeneous or stochastic demand. Heterogeneous prices could arise either because there is actual price variation among consumers or because consumers (mis)perceive prices differently. Our main result says the following: if heterogeneous prices have a distribution among consumers that is (in a sense) stable across observations, then a model where consumers have a common utility function but face heterogeneous prices has precisely the same implications as a heterogeneous preference/random utility model (with no price heterogeneity).

Date: 2022-01, Revised 2026-05
New Economics Papers: this item is included in nep-com and nep-upt
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