Inflation and variety

Dong, M

Inflation and variety

Dong, M

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Publisher:: Blackwell Publishing Limited
Publication Type:: Journal Article
Citation:: International Economic Review, 2010, 51 (2), pp. 401 - 420
Issue Date:: 2010-01

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Field	Value	Language
dc.contributor.author	Dong, M	en_US
dc.date.issued	2010-01	en_US
dc.identifier.citation	International Economic Review, 2010, 51 (2), pp. 401 - 420	en_US
dc.identifier.issn	0020-6598	en_US
dc.identifier.uri	http://hdl.handle.net/10453/31655
dc.description.abstract	Economies undergoing high inflation often experience a reduction of product variety in the marketplace. Existing models study how inflation affects quantity, but very few have studied how inflation affects variety. In a monetary model with explicit microfoundations, I analyze how inflation affects variety as well as quantity. I consider two pricing mechanisms-bargaining and price posting with directed search. I show that inflation reduces both quantity and variety under both pricing mechanisms. Quantitatively, the model implies that the total welfare cost of 10% inflation ranges from 4.77% to 8.4% under bargaining and is 1.52% under price posting. © (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.	en_US
dc.publisher	Blackwell Publishing Limited	en_US
dc.relation.ispartof	International Economic Review	en_US
dc.relation.isbasedon	10.1111/j.1468-2354.2010.00585.x	en_US
dc.subject.classification	Economics	en_US
dc.title	Inflation and variety	en_US
dc.type	Journal Article
utslib.citation.volume	2	en_US
utslib.citation.volume	51	en_US
utslib.for	1402 Applied Economics	en_US
utslib.for	14 Economics	en_US
pubs.embargo.period	Not known	en_US
pubs.organisational-group	/University of Technology Sydney
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
utslib.copyright.status	closed_access
pubs.consider-herdc	false	en_US
pubs.issue	2	en_US
pubs.volume	51	en_US

Abstract:

Economies undergoing high inflation often experience a reduction of product variety in the marketplace. Existing models study how inflation affects quantity, but very few have studied how inflation affects variety. In a monetary model with explicit microfoundations, I analyze how inflation affects variety as well as quantity. I consider two pricing mechanisms-bargaining and price posting with directed search. I show that inflation reduces both quantity and variety under both pricing mechanisms. Quantitatively, the model implies that the total welfare cost of 10% inflation ranges from 4.77% to 8.4% under bargaining and is 1.52% under price posting. © (2010) by the Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

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http://hdl.handle.net/10453/31655