a search theoretic model of the retail market for illicit drugs a search theoretic model of the retail market for illegal drugs is developed trade occurs in bilateral potentially long lived matches between sellers and buyers buyers incur search costs when experimenting with a new seller moral hazard is present because buyers learn purity only after a trade is made this model is consistent with some new stylized facts about the drugs market and it is informative for policy design the effectiveness of different enforcement strategies is evaluated including some novel ones that leverage the moral hazard present in the market copyright oxford university press

the transactions velocity of money and its efficiency this paper models the unobservable rate of return on money balances r as depending directly on the transactions velocity of money v approximating this relationship linearly the efficient markets hyphothesis emh is shown to imply that first differences of the log of v should either be random or should show negative first order serial correlation at most the empirical evidence presented below is consistent with the emh these results are of interest in three directions first they add support at the macroeconomic level for the emh velocity in the macroeconomy seems to behave as expected based on the fair degree of support for the emh at the micro

price dispersion and the role of stores in this paper we study price dispersion in the norwegian retail market for 766 products across 4 297 stores over 60 months price dispersion for homogeneous products is significant and persistent with a coefficient of variation of 37 percent for the median product price dispersion differs between product categories and over time store heterogeneity accounts for 30 percent of the observed variation in prices for the median product month and for around 50 percent for the sample as a whole price dispersion is still prevalent after correcting for store heterogeneity

consumer search incomplete exchange rate pass through and optimal interest rate policy this paper studies utility maximizing monetary policy in a two country economy with consumer search frictions search frictions provide a microfoundation for incomplete exchange rate pass through and international deviations from the law of one price lop i show that optimal interest rate policy targets deviations from the lop and acts to mitigate the effect of search frictions in a quantitative setting with internationally correlated technology and preference shocks optimal policy generates positive cross country correlation of nominal interest rates

price setting in online markets does it click using a unique dataset of daily u s and u k price listings and the associated number of clicks for precisely defined goods from a major shopping platform we shed new light on how prices are set in online markets which have a number of special properties such as low search costs low costs of monitoring competitors prices and low costs of nominal price adjustment we document that although online prices are more flexible than offline prices they nevertheless exhibit relatively long spells of fixed prices large size and low synchronization of price changes considerable crosssectional dispersion and low sensitivity to predictable or unanticipated changes in demand conditions qualitatively these patterns are similar to those observed for offline prices a finding that suggests a need for more research on the sources of price rigidities and dispersion

a new year a new you within individual variation in food purchases abstract we document that within individual variation in food choices is substantial and has potentially important consequences for nutrition and hence well being we develop an approach that allows us to study the determinants of this within individual variation within an economic framework and allow for across individual preference heterogeneity we show that around one fifth of within individual fluctuations in diet quality is explained by standard economic variables prices and budgets along with advertising and weather the residual fluctuations are important and are larger for lower income and younger people and individuals who state they are impulsive we propose a two selves model of food purchase behavior to structurally interpret these empirical patterns we use nonparametric revealed preference techniques to show that this model rationalizes our food purchase data

equilibrium price dispersion with sequential search abstract the paper studies equilibrium pricing in a product market for an indivisible good where buyers search for sellers buyers search sequentially for sellers but do not meet every seller with the same probability specifically a fraction of the buyers meetings lead to one particular large seller while the remaining meetings lead to one of a continuum of small sellers in this environment the small sellers would like to set a price that makes the buyers indifferent between purchasing the good and searching for another seller the large seller would like to price the small sellers out of the market by posting a price that is low enough to induce buyers not to purchase from the small sellers these incentives give rise to a game of cat and mouse whose only equilibrium involves mixed strategies for both the large and the small sellers the fact that the small sellers play mixed strategies implies that there is price dispersion the fact that the large seller plays mixed strategies implies that prices and allocations vary over time we show that the fraction of the gains from trade accruing to the buyers is positive and nonmonotonic in the degree of market power of the large seller as long as the large seller has some positive but incomplete market power the fraction of the gains from trade accruing to the buyers depends in a natural way on the extent of search frictions

do pharmacists buy bayer informed shoppers and the brand premium we estimate the effect of information and expertise on consumers willingness to pay for national brands in physically homogeneous product categories in a detailed case study of headache remedies we find that more informed or expert consumers are less likely to pay extra to buy national brands with pharmacists choosing them over store brands only 9 percent of the time compared to 26 percent of the time for the average consumer in a similar case study of pantry staples such as salt and sugar we show that chefs devote 12 percentage points less of their purchases to national brands than demographically similar nonchefs we extend our analysis to cover 50 retail health categories and 241 food and drink categories the results suggest that misinformation and related consumer mistakes explain a sizable share of the brand premium for health products and a much smaller share for most food and drink products we tie our estimates together using a stylized model of demand and pricing

using price distributions to estimate search costs we show how the equilibrium restrictions implied by standard search models can be used to estimate search cost distributions using price data alone we consider both sequential and nonsequential search strategies and develop estimation methodologies that exploit equilibrium restrictions to recover estimates of search cost heterogeneity that are theoretically consistent with the search models we illustrate the method using online prices for several economics and statistics textbooks

price dispersion and the border effect abstract cross country price differences could reflect regional market segmentation within countries or national segmentation at the border in a search based model of price setting identifying national versus regional segmentation requires data on regional trade flows a calibration to u s and canadian data implies predominantly regional frictions u s producers are three times more likely to sell in their home region than another u s region and canadian producers are seven times more likely to sell in their home region than another canadian region frictions vis a vis foreign regions are only slightly higher models that ignore regional segmentation can misstate the severity of frictions at the border

maximum likelihood estimation of search costs abstract in a recent paper hong and shum 2006 using price distributions to estimate search costs rand journal of economics 37 257 275 present a structural method to estimate search cost distributions we extend their approach to the case of oligopoly and present a new maximum likelihood method to estimate search costs we apply our method to a data set of online prices for different computer memory chips the estimates suggest that the consumer population can be roughly split into two groups which either have quite high or quite low search costs search frictions confer a significant amount of market power to the firms despite more than 20 firms operating in each of the markets we estimate price cost margins to be around 25 the paper also illustrates how the structural method can be employed to simulate the effects of the introduction of a sales tax

bundle size pricing as an approximation to mixed bundling multiproduct firms can set separate prices for all possible bundled combinations of its products mixed bundling however this is impractical for firms with more than a few products because the number of prices increases exponentially with the number of products we find that simple pricing strategies are often nearly optimal specifically we show that bundle size pricing setting prices that depend only on the size of bundle purchased tends to be more profitable than offering the individual products priced separately and tends to closely approximate the profits from mixed bundling jel d24 d42 l11 l13 l25

multiproduct equilibrium price dispersion abstract the model of burdett and judd econometrica51 1993 955 969 is generalized to the case of may goods consumers choose the best price observed for each good there are two classes of equilibria those that involve constant expected profits for each good independently of price and those with increasing profits for each good in price a continuum of the latter type always exists these equilibria are qualitatively different than the unique equilibrium of the single good case journal of economic literature classification numbers d83 d43 l13

cyclic pricing by a durable goods monopolist in the model of this paper a monopoly seller of a durable good holds periodic sales as a means of price discrimination a new cohort of consumers enters the market in each period interested in purchasing the good either immediately or after a delay within each cohort consumers vary in their tastes for the good under broad conditions the seller will vary the price over time in most periods he will charge a price just low enough to sell immediately to consumers with a high willingness to pay periodically however he will drop the price far enough to sell to an accumulated group of consumers with a low willingness to pay

multiproduct search and the joint search effect abstract this paper presents a sequential search model where consumers look for several products from multiproduct firms multiproduct search can significantly influence firms pricing decisions for example it can make market prices decrease with search costs possible applications of the model are also discussed jel d11 d43 d83

the morphology of price dispersion this paper is a study of the shape and structure of the distribution of prices at which an identical good is sold in a given market and time period we find that the typical price distribution is symmetric and leptokurtic with a standard deviation between 19 and 36 only 10 of the variance of prices is due to variation in the expensiveness of the stores at which a good is sold while the remaining 90 is due in approximately equal parts to differences in the average price of a good across equally expensive stores and to differences in the price of a good across transactions at the same store we show that the distribution of prices that households pay for the same bundle of goods is approximately normal with a standard deviation between 9 and 14 half of this dispersion is due to differences in the expensiveness of the stores where households shop while the other half is mostly due to differences in households choices of which goods to purchase at which stores we find that households with fewer employed members pay lower prices and do so by visiting a larger number of stores rather than by shopping more frequently

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

life cycle prices and production we use scanner data and time diaries to document how households substitute time for money through shopping and home production we document substantial heterogeneity in prices paid for identical goods for the same area and time with older households shopping the most and paying the lowest prices doubling shopping frequency lowers a good s price by 7 to 10 percent we estimate the shopper s price of time and use this series to estimate an elasticity of substitution between time and goods in home production of roughly 1 8 the observed life cycle time allocation implies a consumption series that differs markedly from expenditures

social security and wealth accumulation in developing economies evidence from the 1981 chilean reform summary wealth holdings are particularly important in developing economies as they allow individuals to insure themselves against income shocks in the absence of developed financial markets in this paper we test whether the existence of future social security benefits impacts wealth holdings by using the 1981 chilean social security reform our estimates are based on the eps 2004 which contains detailed data on wealth holdings assets and liabilities and social security account balances by means of different econometric methods we find no impact of social security on wealth accumulation with the exception of poorer individuals in that case each additional peso in social security wealth depresses other types of wealth by almost 0 1 pesos mainly in regard to real estate 2008 elsevier ltd all rights reserved

an equilibrium search model of synchronized sales we demonstrate the existence of periodic nonstationary equilibria with self generating cycles in a simple model of random search our results provide a theory of synchronized sales based on product market search by heterogeneous consumers that is our model explains how it can be optimal for all sellers to follow a repeated pattern of posting a high price for several periods and then posting a low price for one period

price setting under uncertainty about inflation abstract we analyze the manipulation of inflation statistics that occurred in argentina starting in 2007 to test the relevance of informational frictions in price setting we estimate that the manipulation of statistics was associated with a higher degree of price dispersion this effect is analyzed in the context of a quantitative general equilibrium model in which firms use information about the inflation rate to set prices reporting inaccurate measures of the cpi entails significant welfare losses especially in economies with volatile monetary policy

social security and household wealth accumulation refined microeconometric evidence this study examines the relationship between social security wealth and fungible wealth using relatively recent micro data the authors find that a ceteris paribus increase in social security wealth has no effect on fungible wealth suggesting that ricardian equivalence holds of the individual wealth categories comprising fungible wealth only pension wealth is negatively and significantly affected by an increase in social security wealth and if some of this pension wealth is not fully funded ricardian equivalence will not hold the authors conclude therefore that the social security system might adversely affect capital accumulation but not necessarily to the degree suggested by others copyright 1993 by mit press

optimal robust bilateral trade risk neutrality a risk neutral seller and buyer with private information bargain over an indivisible item we prove that optimal robust bilateral trade mechanisms are payoff equivalent to non wasteful randomized posted prices

a head to head comparison of augmented wealth in germany and the united states we examine the composition of augmented household wealth i e the sum of net worth and pension wealth in the united states and germany pension wealth makes up a considerable portion of household wealth of about 48 percent in the united states and 61 percent in germany when pension wealth is included in household wealth the gini coefficient falls from 0 889 to 0 700 in the united states and from 0 755 to 0 508 in germany if the wealth shares in germany were the same as in the united states this would lead to a 12 6 percent increase in the gini coefficient in the augmented wealth distribution in germany

the price ain t right hospital prices and health spending on the privately insured we use insurance claims data for 27 6 percent of individuals with private employer sponsored insurance in the us between 2007 and 2011 to examine the variation in health spending and in hospitals transaction prices we document the variation in hospital prices within and across geographic areas examine how hospital prices influence the variation in health spending on the privately insured and analyze the factors associated with hospital price variation four key findings emerge first health care spending per privately insured beneficiary varies by a factor of three across the 306 hospital referral regions hrrs in the us moreover the correlation between total spending per privately insured beneficiary and total spending per medicare beneficiary across hrrs is only 0 14 second variation in providers transaction prices across hrrs is the primary driver of spending variation for the privately insured whereas variation in the quantity of care provided across hrrs is the primary driver of medicare spending variation consequently extrapolating lessons on health spending from medicare to the privately insured must be done with caution third we document large dispersion in overall inpatient hospital prices and in prices for seven relatively homogenous procedures for example hospital prices for lower limb mris vary by a factor of twelve across the nation and on average two fold within hrrs finally hospital prices are positively associated with indicators of hospital market power even after conditioning on many demand and cost factors hospital prices in monopoly markets are 15 3 percent higher than those in markets with four or more hospitals

on forecasting interest rates an efficient markets perspective abstract efficient markets do not preclude economic agents from successfully forecasting movements in short term interest rates for brief forecast intervals however ex ante changes in long term rates are sufficiently close to zero that economic agents are not likely to improve upon the no change prediction of the martingale model economic agents in effect are not likely to succeed in forecasting short term movements in long term interest rates this paper illustrates the closeness of the martingale approximation for two sets of canadian interest rates data emphasizing the importance of the forecast interval the paper then examines three sets of recorded forecasts of canadian interest rates and finds results consistent with the theoretical discussion

frictional goods markets theory and applications we analyse dynamic general equilibrium models with more or less directed search by informed buyers and random search by uninformed buyers this nests existing specifications and generates new insights a quantitative application concerns the welfare cost of inflation which is known to be quite high with pure random search and low with pure directed search our calibration implies the impact of inflation is fairly low in part because in addition to the usual costs it provides benefits by more heavily taxing high price sellers that inefficiently profit from exploiting the uninformed other applications analyse analytically and numerically changes in credit conditions and information

the bank capital decision a time series cross section analysis this paper seeks to explain the dramatic decline in capital to asset ratios in u s commercial banks during the last two decades it is hypothesized that the rise in nominal interest rates during this period might have contributed substantially to the fall in capital ratios time series cross section estimation supports the hypothesis regarding the interest rate bank capital is the sum of equity plus debt subordinated to deposits capital provides a cushion that protects the bank from insolvency when the value of its assets falls a bank can meet its obligations to depositors as long as losses on its asset portfolio do not exceed its capital the ratio of capital to total assets in u s commercial banks has fallen dramatically in the last two decades dropping from 11 7 percent in 1961 to 5 7 percent in 1978 the lowest level since world war ijj1 figure 1 shows the decline in the ratio of capital to noncash assets these figures suggest that the federal deposit insurance corporation fdic and uninsured depositors are being exposed to increased probabilities of losses from bank insolvencies however relatively little empirical research has been devoted to the determinants of the bank capital decision further the existing work see for example peltzman 24 mingo 20 or mayne 17 18 uses only cross sectional data and therefore does not necessarily explain the decline in capital to asset ratios over time previous empirical research has also focused on book values rather than market values of debt and equity although market values provide better estimates of the protection afforded by capital this practice might be partly justified by the attention paid to book values by bank regulators however the increasing use of qualitative factors as well as book ratios in capital regulation indicates that regulators are aware of the deficiencies in book values many of the so called qualitative considerations are precisely the factors that distinguish market from book value 6 pp 78 80 finally difficulties arise over the proper measure of capital the empirical studies cited above treat equity and debt capital symmetrically both equity and assistant professor of finance economics boston university school of management this paper was originally written as part of a doctoral dissertation at m i t helpful suggestions from robert mcdonald richard schmalensee larry summers and edward j kane are gratefully acknowledged l these statistics are based on the market values of capital and assets the methods used to construct the market value series are described in the appendix capital asset ratios based on book values also have fallen over the period in question although not as severely

equilibrium price dispersion in retail markets for prescription drugs this study seeks to establish the empirical importance of price dispersion due to costly consumer search by examining retail prices for prescription drugs posted prices in two geographically distinct markets are shown to vary considerably across pharmacies within the same market even after one controls for variation due to pharmacy differences pharmacy heterogeneity accounts for at most one third of the observed price dispersion the empirical analysis hinges on the observation that consumers incentives to price shop depend on characteristics of the drug therapy cross sectional patterns in price distributions across drugs are consistent with the predictions of a search model prices for repeatedly purchased prescriptions for which the expected benefits of search are highest exhibit significant reductions in both dispersion and price cost margins

collusion with intertemporal price dispersion we develop a theory of optimal collusive intertemporal price dispersion dispersion clouds consumer price awareness encouraging firms to coordinate on dispersed prices our theory generates a collusive rationale for price cycles and sales patient firms can support optimal collusion at the monopoly price for less patient firms monopoly prices must be punctuated with fleeting sales the most robust structure involves price cycles that resemble edgeworth cycles low consumer attentiveness enhances the effectiveness of price dispersion by reducing the payoff to deviations involving price reductions however for sufficiently low attentiveness price rises are also a concern

the dynamics of markups and inventories in retailing firms this paper is concerned with the interaction between price and inventory decisions in retailing firms and its implications for the dynamics of markups and the existence of sales pro motions we consider a model where a monopolistically competitive retailer decides price and inventories and assumes lump sum costs when placing orders or changing nominal prices tn this model the existence of stockout probabilities and fixed ordering costs generate a cyclical price behaviour characterized by long periods without nominal price changes and short periods with very low prices i e sales promotions we estimate this model using a unique longitudinal dataset with information about retail and wholesale prices inventories orders and sales for several brands in a supermarket chain based on the estimated model we perform several counterfactual experi ments that show the important role that inventories and fixed ordering costs play in the dynamics of retail prices and the frequency of sales promotions in this dataset

determinants of household saving in the g 7 countries recent evidence this paper employs data from the last four decades to analyse major determinants of household saving for the group of seven g 7 nations particular attention is paid to the effects of interest rates government saving and social security contributions regression analysis is used to control for the effects of both the level and changes in income per capita and inflation

opportunity cost inattention and the bidder s curse abstract auction winners sometimes suffer a bidder s curse paying more for an item at auction than the fixed price charged for an identical item by other sellers this seemingly irrational behavior is puzzling because the information necessary to avoid overpaying would appear to be readily available to bidders yet they seem to ignore it to understand this behavior we consider the bidders decisions whether to acquire information about the fixed price before bidding in the presence of opportunity costs our theory introduces costly information acquisition into an auction model with a fixed price aftermarket selling an identical good when information about the fixed price is costly bidders sometimes remain rationally ignorant and overbid in the auction generating the bidder s curse to assess the empirical validity of our proposed explanation we study the model s predictions in an experiment where subjects have an opportunity cost of looking up a fixed price and bid in an auction we find that information acquisition decreases and overbidding increases with opportunity cost as predicted most observed lookup behavior is rationalizable and rational ignorance reliably generates the bidder s curse

forecasting canadian short term interest rates the author investigates the forecasting performance of a number of simple prediction techniques for short term interest rates in particular quarterly forecasts of canadian three month t bill rates from one to forty quarters in the future are generated during 1963 92 using several time series methods and market based yield curve strategies comparison is made with the martingale and for a shorter recent sample with the predictions made by several economic forecasters for the most part utilization of the yield curve proved best though it must be granted that no methodology was able to outperform the martingale for horizons up to a year

the timing of sales this paper presents a model of intertemporal price discrimination a fixed number of sellers produce a homogeneous good consumers with different preferences enter the market in each period and leave when they make a purchase the sellers typically vary their prices over time charging a high price in most periods but occasionally cutting the price to sell to a large group of customers with a low reservation price in some equilibria all stores lower their price at the same time and to the same level

inflation at the household level abstract we use scanner data to estimate inflation rates at the household level households inflation rates have an annual interquartile range of 6 2 9 0 percentage points most of the heterogeneity comes not from variation in broadly defined consumption bundles but from variation in prices paid for the same types of goods lower income households experience higher inflation but most cross sectional variation is uncorrelated with observables households deviations from aggregate inflation exhibit only slightly negative serial correlation almost all variability in a household s inflation rate comes from variability in household level prices relative to average prices not from variability in aggregate inflation

diagnosing consumer confusion and sub optimal shopping effort theory and mortgage market evidence mortgage loans are leading examples of transactions where experts on one side of the market take advantage of consumers lack of knowledge and experience we study the compensation that borrowers pay to mortgage brokers for assistance from application to closing two findings support the conclusion that confused borrowers overpay for brokers services i a model of effective shopping shows that bor rowers sacrifice at least 1 000 by shopping from too few brokers ii borrowers who compensate their brokers with both cash and a commission from the lender pay twice as much as similar borrowers who pay no cash jel d12 d14 g21 we study a large and financially complex expenditure that the majority of consumers make only a few times in their lives the payment for mortgage origination services in these transactions information is not only imperfect but traditional market practices have likely contributed to consumer confusion these payments range from 0 to 30 000 for mortgages of normal size mortgage brokers receive payments from both borrowers and from wholesale lenders on most loans broker fees paid in cash by the borrower are usually broken down into more than a dozen individual items such as origination fee discount points funding fee and doc prep in addition to these cash payments about half of the value that the bor rower transfers to the broker takes the form of a payment from the wholesale lender to the mortgage broker the borrower bears the burden of this part of the payment in the form of a higher interest rate on the loan these payments compensate mortgage brokers for arranging mortgage loans we stress that this paper is about how and how much borrowers pay their brokers for origination services the broker is an administrator of the process of loan origination the broker bears none of the risk of default on the mortgage so that risk is not a determinant of the broker s compensation under standard theories of pricing because consumers enter the mortgage market infrequently and because features of the market make it difficult to learn the best price mortgage origination pricing

the october 1979 change in the u s monetary regime its impact on the forecastability of canadian interest rates subsequent to the october 1979 shift in monetary policy in the united states interest rates in north america not only reached unprecedented levels but also exhibited unprecedented volatility using canadian data the authors show that anticipated quarterly changes in long term rates associated with the rational expectations model have remained small during this post shift period the authors examine three sets of recorded forecasts of long term interest rates in canada and note their failure to improve upon the no change prediction the perverse relationship between the slope of the yield curve and the subsequent movement in long term rates exists in the canadian data but is of only modest value in a forecasting context the excess returns on long term bonds implicit in the recorded forecasts of the level of interest rates vary sharply yet there is little evidence that forecasters have identified a predictable component of time varying term premia

the q s s pricing rule we introduce menu costs in the search theoretic model of imperfect competition of burdett and judd when menu costs are not too large the equilibrium is such that sellers follow a q s s pricing rule according to the rule a seller lets inflation erode the real value of its nominal price until it reaches some point s then the seller pays the menu cost and resets the real value of its nominal price to a point randomly drawn from a distribution with support s q where s s q a q s s equilibrium differs with respect to a standard s s equilibrium 1 in a q s s equilibrium sellers sometimes keep their nominal price constant to avoid paying the menu cost other times because they are indifferent to changes in the real value of their price an exploratory calibration reveals that menu costs account less than half of the observed duration of nominal prices 2 in a q s s equilibrium higher inflation leads to higher real prices as sellers pass onto buyers the cost of more frequent price adjustments and to lower welfare

uniform pricing in us retail chains we show that most u s food drugstore and mass merchandise chains charge nearly uniform prices across stores despite wide variation in consumer demographics and competition demand estimates reveal substantial within chain variation in price elasticities and suggest that the median chain sacrifices 16 million of annual profit relative to a benchmark of optimal prices in contrast differences in average prices between chains are broadly consistent with the optimal benchmark we discuss a range of explanations for nearly uniform pricing highlighting managerial inertia and brand image concerns as mechanisms frequently mentioned by industry participants relative to our optimal benchmark uniform pricing may significantly increase the prices paid by poorer households relative to the rich dampen the response of prices to local economic shocks alter the analysis of mergers in antitrust and shift the incidence of intranational trade costs

discrete adjustment to a changing environment experimental evidence abstract a laboratory experiment illustrates cognitive limitations in decision making that may be relevant for modeling price setting our subjects systematically depart from the optimal bayesian response in several respects their responses are random even conditioning on available information subjects adjust in discrete jumps rather than after each new piece of information and by both large and small amounts contrary to the predictions of an ss model of optimal adjustment subject to a fixed cost and they prefer to report round numbers even when that requires additional effort a model of inattentive adjustment is found to quantitatively outperform popular alternatives

multiproduct monopoly commodity bundling and correlation of values through what selling strategy can a multiproduct monopolist maximize his profits when his knowledge about individual consumers preferences is limited one possibility extensively studied in the context of a single good monopoly is to use quantity dependent pricing as a means of discriminating among customers with differing tastes see for example oi 1971 and maskin and riley 1984 an alternative technique for price discrimination first suggested by stigler 1968 and analyzed further by adams and yellen 1976 is for the monopolist to package two or more products in bundles rather than selling them separately through a series of examples adams and yellen illustrate that bundling can serve as a useful price discrimination device even when all consumers willingnesses to pay for each of the goods individually are unaffected by whether they are also consuming the other product a typical example is illustrated in figure i adapted from figure iv in adams and yellen where there are two goods three consumers ab c who consume at most one unit of each good with reservation values for each good that are independent of whether the other good is consumed and zero costs of production there a bundle offered at a price of 100 fully extracts all potential surplus which would be impossible pricing the goods independently unfortunately though these authors do not provide any general characterization of the circumstances in which bundling is actually a multiproduct monopolist s optimal strategy their examples however such as figure i create the impression that the profitable use of bundling

price dispersion and demand uncertainty evidence from u s scanner data i use the prescott 1975 hotels model to explain variations in price dispersion across items sold by supermarkets in chicago the effect of demand uncertainty on price dispersion is highly significant and quantitatively important my estimates suggest that more than 40 of the cross sectional standard deviation of log prices is due to demand uncertainty i also find that price dispersion measures are negatively correlated with the average price but are not negatively correlated with the revenues from selling the good across stores and weeks and with the number of stores that sell the good temporary sales are modeled as a reaction to unwanted inventories that are accumulated when the realization of demand is low the effect of demand uncertainty on the frequency of temporary sales is also highly significant and quantitatively important items with more demand uncertainty tend to accumulate unwanted inventories more often and tend to have temporary sales more often

price hike of staple food nutritional impact and consumption adjustment evidence from the 2005 2010 rice price increase in rural bangladesh this paper studies the nutritional impact of the rice price increase between 2005 and 2010 on households in rural bangladesh and their resulting adjustment in consumption of rice non rice food and

deriving zero coupon rates alternatives to orthodoxy the bootstrapping method for deriving zero coupon rates from par yield curves implicitly assumes a specific forecast of prospective interest rate changes in the event that market conditions reflect this standard methodology but at the same time individual practitioners reject the implicit forecast contrarian opportunities will be present additionally to the extent that zero coupon discount rates are based on unacceptable assumptions any subsequent present valuation calculation using these rates would be suspect we propose two methodologies whereby any explicit interest rate forecast may be used for determining zero coupon interest rates backsliding calculates zero coupon returns by assuming interim interest cash flows are always rolled over into the longest maturity coupon bearing instruments available frontsliding requires rolling these cash flows over into the shortest maturity vehicles the choice of methodology should be driven by rate forecasts as well as whether the objective is for f

consumption versus expenditure previous authors have documented a dramatic decline in food expenditures at the time of retirement we show that this is matched by an equally dramatic rise in time spent shopping for and preparing meals using a novel data set that collects detailed food diaries for a large cross section of u s households we show that neither the quality nor the quantity of food intake deteriorates with retirement status we also show that unemployed households experience a decline in food expenditure and food consumption commensurate with the impact of job displacement on permanent income these results highlight how direct measures of consumption distinguish between anticipated and unanticipated shocks to income whereas measures of expenditures obscure the distinction

true monopolistic competition as a result of imperfect information the paper restates hart s 1985a 1985b definition of large group monopolistic competition distinguishes it from oligopolistic competition and raises the question of whether there are reasonable circumstances that give rise to true monopolistic competition as defined the purpose is to show that consumers imperfect information may create conditions that will turn an otherwise oligopolistic market into a truly monopolistically competitive one