In ation and Welfare with Search and Price Dispersion

Abstract

This paper studies the e¤ect of in‡ation on welfare in a monetary economy with price dispersion and consumer search. When facing greater price dispersion with higher in‡ation, consumers search harder for lower prices, and increased search raises welfare by intensifying market competition. Producers post ine¢ ciently high prices, and this creates a welfare… (More)

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