generating real persistent effects of monetary shocks how much nominal rigidity do we really need abstract this paper attempts to assess whether money can generate persistent economic fluctuations in dynamic general equilibrium models of the business cycle we show that a small nominal friction in the goods market can make the response of output to monetary shocks large and persistent if it is amplified by real wage rigidity in the labor market we also argue that for plausible levels of real wage rigidity a small degree of nominal stickiness is sufficient for money to produce economic fluctuations as persistent as those observed in the data

avoiding some costs of inflation and crawling toward hyperinflation the case of the brazilian domestic currency substitute the pattern of a classical hyperinflation is an acute acceleration of the inflation level accompanied by rapid substitution away from domestic currency until the real plan 1 july 1994 however brazil experienced inflation levels well above 1000 a year since 1988 without entering the classical hyperinflation path two elements played key roles in differentiating the brazilian case from the classical hyperinflations indexation and the provision of a reliable domestic currency substitute i e the provision of liquidity to interest bearing assets this paper claims that the existence of this domestic currency substitute was the main source of both the inability of the brazilian central bank to fight inflation and of the unwillingness of brazilians to face the costs of such a fight the provision of the domestic currency substitute through the banking sector is modeled and the main macroeconomic consequences of this monetary regime are derived those are the lack of a nominal anchor for the price system due to the passive monetary policy and the non controllability of seigniorage unlike traditional models of hyperinflations

consumer skepticism of advertising claims testing hypotheses from economics of information propositions regarding consumers differential skepticism for search experience and credence claims are tested in an experiment using adult consumers the results provide clear support for nelson s 1970 hypotheses that consumers are more skeptical of experience than search attribute claims and more skeptical of subjective than of objective claims no support is found however for the darby and kami 1973 hypothesis that consumers will be more skeptical of credence than of experience attribute claims or for the hypothesis that consumers will not be less skeptical of experience claims for low priced goods

consumer preference for a no choice option the traditional focus in the decision making literature has been on understanding how consumers choose among a given set of alternatives the notion that preference uncertainty may lead to choice deferral when no single alternative has a decisive advantage is tested in seven studies building on recent research the article shows that the decision to defer choice is influenced by the absolute difference in attractiveness among the alternatives provided and is not consistent with trade off difficulty or the theory of search these findings are then extended to show that choice deferral can also be modified for the same alternatives by manipulations that make them appear more similar in attractiveness or that decrease the need to differentiate among them the results are consistent with the notion that preference uncertainty results in a hesitation to commit to any single action since small differences in attractiveness among the alternatives are potentially reversible consistent with this premise the effect of attractiveness difference on choice deferral decreased significantly when subjects were first allowed to practice making monetary trade offs among the available alternatives

search and consumer theory a consumer faces list prices for commodities but can buy one at a discount discounts vary randomly between sellers the number of quotations sought depends on list prices search costs and wealth this function is homogeneous of degree zero and provided some sufficient conditions are satisfied is increasing in wealth decreasing in search cost independent of the list price of the discounted commodity if indirect utility is multiplicatively separable increasing in the list price if the commodity is a necessity increasing in the list price of substitutes slutsky s equation is generalized to include search

the value of time spent in price comparison shopping survey and experimental evidence the value that consumers place on time spent in price comparison shopping is central to the economics of information theory and models of consumers search behavior yet few empirical studies have examined consumers subjective value of time building on gary becker s work this article presents two tests of a model of the subjective value of time in an effort to explain consumers subjective value of time while they are price comparison shopping the model introduces perceived enjoyment of shopping as a new explanatory variable the findings reveal that respondents incorporate both wage rates and perceived enjoyment of price comparison shopping into their subjective value of time

inflation debt and indexation these twelve essays cover topics on the frontier of indexation and practice an often proposed and debated tool of economic policy they range from highly theoretical discussions to practical experiences in brazil and europe rudiger dombush is ford international professor of economics at mit mario henrique simonsen is director of the postgraduate school of economics getulio vargas foundation rio de janeiro and former minister of finance and planning brazil

search costs and adaptive consumers short time delays do not affect choice quality using online price comparison and shopping platforms makes experiencing slow connections lags and waiting times for information an unfortunate reality however little attention has been paid to analyzing the effects of such delayed display of information on product choice behavior this article explores the effect of time delays in a multi attribute choice laboratory experiment by not providing information immediately when requested but after short time delays increasing these waiting times reduced the amount of information looked up but did not affect choice quality higher time delays made decision makers use more deliberate search processes whereas low time delays induced inefficient over searching

wage indexation and output stability revisited since gray 1976 and fischer 1977 the accepted view is that wage indexation stabilizes output when shocks are nominal and destabilizes output when shocks are real this paper examines this proposition s validity when wage indexation is based on lagged inflation it shows that i in a gray fischer economy with plausible parameters indexing wages to lagged inflation destabilizes output regardless of the type of shocks ii the gray fischer result may be restored if nominal shocks have a strong direct effect on prices given wages iii wage indexation to lagged inflation can be neutral for output stability if monetary policy is accommodative

price search in a product market regressions using panel data on grocery purchases show lower purchase costs are significantly associated with a larger number of stores visited per week there is also evidence but somewhat weaker of diminishing gains from such search an economic model of the determinants of search suggests that prices paid quantities purchased and number of store visits are interrelated a view supported by results of estimating a proposed simultaneous equations model

real exchange rates and the pattern of trade comparative dynamics for north and south abstract using a two country model of imperfect competition this paper examines cross sectional implications for the time series behavior of real exchange rates across different patterns of trade under intersectoral trade price setters display less interaction in their pricing decisions across national boundaries allowing for greater deviation and weaker mean reversion in relative prices conversely with intra industry trade greater price linkages between similar countries trading in similar goods generate lower pass through and less real exchange rate persistence the pattern of trade is shown to essentially alter the degree of domestic price stickiness which in turn affects the self correcting mechanism of an open economy

economic search an experimental study this paper presents results of experiments designed to test several of the hypotheses present in the theoretical literature on optimal economic search first we test whether the subjects searchers actually search for wages in ways that are consistent with setting an optimal reservation wage we then proceed to determine experimentally the effects of risk aversion increased search costs changes in risk brought about by a mean preserving transformation of the distribution of wage offers the presence or absence of recall the existence of a finite horizon and the searcher s state of knowledge about the underlying distribution of wages in general we find that the searchers exhibit behavior that is consistent with that predicted by theory differences between risk neutral and risk averse searchers are found and the responses of both groups to changes in search costs in the degree of risk or in the state of knowledge are consistent with theoretical predictions

an experimental examination of the economics of information this article presents an experimental test of propositions that come from stigler s classic economics of information theory it reviews previous empirical evidence for the propositions and discusses the mixed support provided for the theory it also discusses a major assumption of the theory and presents hypotheses that suggest that the propositions are not as universal as has been thought the results indicate that buyers with more certain beliefs about retailer price images search less and are less responsive to changes in the costs and benefits of search than buyers with less certain beliefs finally the article discusses the implications of the results for both economics and marketing

can entrepreneurial firms benefit from product piracy abstract we examine the potential benefits of product piracy to entrepreneurial firms specifically we use a resource based perspective to show that a decrease in the inimitability of an entrepreneurial firm s intellectual property does not necessarily diminish performance when piracy increases the value of this resource and an information economics perspective to explain why and when imitation can increase the value of an intellectual property resource this explanation reconciles empirical studies that indicate mixed results it also expands the resource based view by suggesting that reducing the value of one resource can directly increase the value of another

heterogeneity in price rigidity evidence from a case study using microlevel data we combine two data sets to study price rigidity the first consists of weekly time series of retail wholesale and spot prices for twelve products these time series contain two exogenous cost shocks we find that prices exhibit more rigidity in response to the second shock than the first the second data set consists of all publicly available information about the shocks content analysis of these information reveals that the first shock is larger and more persistent and the market has more information on it than the second we conclude therefore that prices are more flexible in response to cost shocks that are larger that are more persistent and on which market participants have more information

price flexibility in channels of distribution evidence from scanner data in this study we empirically examine the extent of price rigidity using a unique store level time series data set consisting of i actual retail transaction prices ii actual wholesale transaction prices which represent both the retailers costs and the prices received by manufacturers and iii a measure of manufacturers costs for 12 goods in two widely used consumer product categories we simultaneously examine the extent of price rigidity for each of the 12 products at both final goods and intermediate goods levels we study two notions of price rigidity employed in the existing literature i the frequency of price changes and ii the response of prices to exogenous cost changes we find that retail prices exhibit remarkable flexibility in terms of both notions of price rigidity i e they change frequently and they seem to respond quickly and fully to cost changes furthermore we find that retail prices respond not just to their direct costs but also to the upstream manufacturers costs which further reinforces the extent of the retail price flexibility at the intermediate goods level of the market in contrast we find relatively more evidence of rigidity in the response of manufacturers prices to cost changes this despite the fact that wholesale prices change frequently and therefore exhibit flexibility according to the first notion of price rigidity

chapter 11 pricing models in marketing publisher summary this chapter brings together a set of diverse efforts in the recent literature on the modeling of price decisions and related questions in marketing there has been an impressive growth in the array of topics investigated in the literature various trends in the development of pricing models are evident from the foregoing review first one trend has been to develop theoretical models to describe observed pricing strategies in the marketplace and to derive conditions under which certain strategies are optimal this trend is clearly evident when one considers the area of dynamic pricing models another trend is an attempt to develop pricing models in which certain aspects of consumer behavior e g asymmetric response to price increases versus price decreases are incorporated this development is quite recent and does offer a large potential a third dominant direction is the use of game theoretic models for developing equilibrium pricing strategies

disinflation shocks in the eurozone a dsge perspective we investigate the effects of disinflation policies on key macroeconomic variables using euro area data and structural vector autoregressions svars we identify disinflation shocks as the only shocks that drive nominal variables to a lower long run level we find that in the immediate aftermath of a disinflation shock the euro area enters in a persistent recession we use these dynamic responses to estimate a dsge model with imperfect information about the disinflation shock we find that both nominal and real frictions and monetary policy gradualism have played a prominent role in the recessionary effect of disinflation shocks conversely allowing for imperfect credibility does not yield a better fit except when we shut key model s frictions down

a consumer perspective on price matching refund policies effect on price perceptions and search behavior although price matching refund policies are common in many retail environments the impact of such policies on consumers has largely been ignored this article reports the results of three studies that examine price matching policies from a consumer perspective study 1 shows that consumers perceive price matching policies as signals of low store prices and that the presence of a refund increases the likelihood of discontinuing price search contrary to the predictions based on signaling theory in information economics studies 2 and 3 show that when search costs are low the number of stores searched increases in the presence versus absence of a price matching policy when search costs are high consumers appear to accept the price matching signal at face value and search less in the presence of a refund the article concludes by discussing the theoretical implications of the findings and suggesting directions for future research