Document Type

Article

Publication Date

1999

Abstract

We relax restrictions on the storage technology in a prototypical monetary search model to study price dispersion. When multiple units of currency can be stored, buyers and sellers enter matches with potentially different willingness to buy or sell. Across the distribution of possible bilateral matches, prices will generally differ even though agents have identical preferences and technologies. We provide existence conditions for a particularly simple equilibrium pattern of exchange and prices. We prove that in the limiting case where search frictions are eliminated, equilibrium prices are uniform. We also prove that a higher initial money stock raises the average price level and increases price dispersion in certain regions of the parameter space. Numerical examples are also provided.

Comments

This is the accepted version of the following article:

Camera, G. and D. Corbae (1999). Money and price dispersion. International Economic Review 40(4), 985-1008

which has been published in final form at DOI: 10.1111/1468-2354.00050.

Peer Reviewed

1

Copyright

Wiley

Share

COinS
 
 

To view the content in your browser, please download Adobe Reader or, alternately,
you may Download the file to your hard drive.

NOTE: The latest versions of Adobe Reader do not support viewing PDF files within Firefox on Mac OS and if you are using a modern (Intel) Mac, there is no official plugin for viewing PDF files within the browser window.