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

the size of the tradable and non tradable sectors evidence from input output tables for 25 countries abstract we compute the tradable and non tradable input shares for consumption and investment from the latest release of oecd input output tables we document that input shares the content of tradable and non tradable goods per unit of final demand differ substantially from final demand shares the amount of tradable and non tradable goods directly demanded for consumption or investment purposes the deviation is especially large for investment expenditures non tradable share estimates are essential to correctly parameterize multi sector dsge open economy models

do state borders matter for u s intranational trade the role of history and internal migration empirical evidence of the impact of borders on international trade flows using the gravity equation approach abounds this paper examines the empirical relevance of state borders in u s interstate trade for various specifications of the gravity equation we find a large and economically significant subnational border effect for some specifications however two model specifications drastically reduce if not eliminate the border effect i dynamic panel specifications controlling for past levels of trade and ii models conditioning on internal migration les resultats empiriques de l analyse des impacts des frontieres sur les flux de commerce international en utilisant les modeles de gravite sont devenus monnaie courante ce texte examine l impact des frontieres entre etats a l aide de cette technique il s avere que les effets de frontieres infranationales sont grands et significatifs pour certaines specifications du modele cependant deux specifications du modele reduisent dramatiquement s ils n eliminent pas l effet de frontiere i des specifications qui prennent en compte les niveaux anterieurs de commerce et ii des specifications qui dependent de la migration interne

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

intra national versus international trade in the european union why do national borders matter the first objective of this paper is to estimate border effects among european union countries in this context the specification of the gravity equation together with the choice of the distance measure are shown to be crucial for assessing the size of the border effect the second objective is to evaluate the determinants of the cross commodity variation in national border effects contrary to previous findings reported in the literature we show that trade barriers do provide an explanation in particular technical barriers to trade together with product specific information costs increase border effects whereas non tariff barriers are not significant our results further suggest that these barriers are not the only cause since the spatial clustering of firms is also found to matter

international prices costs and markup differences relative cross border retail prices in a common currency comove closely with the nominal exchange rate using product level prices and wholesale costs from a grocery chain operating in the united states and canada we decompose this variation into relative costs and markup components the high correlation of nominal and real exchange rates is driven mainly by changes in relative costs national borders segment markets retail prices respond to changes in costs in neighboring stores within the same country but not across the border prices have a median discontinuous change of 24 percent at the border and 0 percent at state boundaries jel f31 l11 l81

information frictions and real exchange rate dynamics abstract real exchange rates are highly volatile and persistent i provide a novel structural explanation for these facts using a model with dispersed information among firms when producers face strategic complementarities in price setting uncertainty about competitors beliefs results in sluggish price adjustment that can generate large and long lived real exchange rate movements i estimate the model using data from the us and euro area and show that it successfully explains the unconditional volatility and persistence of the real exchange rate the model also accounts for the persistent and hump shaped real exchange rate behavior conditional on nominal disturbances documented by a structural var about 50 of this persistence is due to the inertial dynamics of higher order beliefs

women workers industrialization global supply chains and corporate codes of conduct the restructured globalized economy has provided women with employment opportunities globalisation has also meant a shift towards self regulation of multinationals as part of the restructuring of the world economy that increases among others things flexible employment practices worsening of labour conditions and lower wages for many women workers around the world in this context as part of the global trend emphasising corporate social responsibility csr in the 1980s one important development has been the growth of voluntary corporate codes of conduct to improve labour conditions this article reviews from a feminist interdisciplinary perspective the broad academic literature on women workers covering the more classical debate on women workers in the industrialization process and entering into women workers in the global supply chains and women workers and corporate codes of conduct the main argument is that this research on women workers is crucial to frame the issues of business ethics and in particular csr and codes of conduct in the context of women in the global political economy when this crucial knowledge is ignored then the ethical policies of the companies also ignore the real situation of the women workers at the bottom of their supply chains

international deviations from the law of one price the role of search frictions and market share this article examines the size and persistence of international deviations from the law of one price in an industry with search frictions cost differences lead foreign and domestic firms to price differently within countries when local firms are more common in each country there are large and persistent price differences across countries large and persistent changes in international relative costs lead to large and persistent changes in international relative prices dynamic considerations imply that the amount of a cost shock firms pass through to prices is u shaped in the market share of firms receiving the shock

border prices and retail prices abstract we analyze retail prices and at the dock import prices of specific items in the bureau of labor statistics bls cpi and ipp databases using both databases simultaneously to identify items that are identical in description at the dock and when sold at retail this identification allows us to measure the distribution wedge associated with bringing traded goods from the point of entry into the united states to their retail outlet we find that overall u s distribution wedges are 50 70 around 10 to 20 percentage points higher than that reported in the literature we discuss the implications of this for measuring the size of the pure tradeables sector exchange rate pass through and real exchange rate determination we find that distribution wedges are very stable over time but there is considerable variation across items there is some variation across the country of origin for the imported item for our major trading partners but not as much as the cross item variation we also investigate the determinants of distribution wedges finding that wedges do not vary systematically with exchange rates but are related to other features of the micro data

optimal monetary policy with relative price distortions this paper analyzes optimal monetary policy in a sticky price model with calvo type staggered price setting in the paper the optimal monetary policy maximizes the expected utility of a representative household without having to rely on a set of linearly approximated equilibrium conditions given the distortions associated with the staggered price setting it shows that the complete stabilization of the price level is optimal in the absence of initial price dispersion while optimal inflation targets respond to changes in the level of relative price distortion in the presence of initial price dispersion

understanding international prices customers as capital the article develops a new theory of pricing to market driven by dynamic frictions of building market shares our key innovation is a capital theoretic model of marketing in which relations with customers are valuable we discipline the introduced friction using data on differences between short run and long run price elasticity of international trade flows we show that the model accounts for several pricing puzzles of international macroeconomics jel e13 f14 f31 f41 f44 m31

consumer search price dispersion and international relative price fluctuations this article develops a model of consumer search consistent with the evidence of substantial price dispersion and time spent shopping within countries to study international deviations from the law of one price lop and relative price fluctuations search frictions lead firms to price discriminate across markets based on the opportunity cost of search which depends on the local wage with productivity and taste shocks estimated from the data deviations from the lop are as volatile and persistent as in the data fluctuations in relative wages real exchange rates and the terms of trade are also consistent with the data

search price setting and inflation a model of monopolistic competition in an inflationary environment is developed which embodies optimal sequential search price dynamics and entry on the part of consumers and firms respectively equilibrium price strategies are s s these bounds increase continuously with consumer search costs and so does price dispersion indeed the whole equilibrium varies smoothly from the competitive bertrand to the monopolistic diamond 1971 end of the spectrum the latter s paradoxical result is explained as a limiting case where frictions on firms side of the market price adjustment costs but not on buyers search costs tend to zero a positive relationship between smooth and perfectly anticipated inflation and price dispersion or uncertainty is established

the status and prospects for genetically modified crops in europe abstract despite the rapid expansion in the global area planted with genetically modified gm crops there has been resistance to this technology in europe this article considers why molecular technologies used to produce gm crops are reviewed and crops currently and soon to become available listed it is argued that the prospects for gm crops depend on 1 consumer acceptance which depends on the perception of the benefits gm crops offer and on confidence in the legislative framework and regulatory procedures designed to identify and quantify any potential disadvantages 2 further technological advances which might reduce any adverse consequences of and enhance the benefits from gm crops 3 patent law which underpins incentives for private investment and largely determines the development of market structure and 4 the relative profitability of gm crops vis a vis conventionally bred varieties which will be a key determinant of the area planted importantly regulations which increase consumer confidence may also raise the costs of planting gm crops and therefore will act to reduce the area planted

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

a structural approach to explaining incomplete exchange rate pass through and pricing to market the continuing depreciation of the dollar against other major currencies coupled with concerns about the impact of china s exchangerate policy on domestic prices has spurred new interest in the exchange rate pass through literature a recent study by economists at the federal reserve board of governors see mario marazzi et al 2005 attracted wide attention by documenting a steady decline over the past decade in the pass through of exchange rates into us import prices this finding was later challenged by a study published by the federal reserve bank of new york hellerstein deirdre daly and christina marsh 2006 which demonstrated that the finding of such a decline depends crucially on the specification of the pass through regression and in particular the inclusion of commodity prices this exchange highlights the need to understand the structural determinants of exchange rate pass through not only because such understanding is important when trying to forecast future pass through patterns but also because it provides guidance regarding the specification of the appropriate reduced form regression and more generally measurement of pass through the increased availability of micro data on prices and quantities means that research uncovering these determinants is more promising than sources of international price stickiness

a structural approach to identifying the sources of local currency price stability the inertia of the local currency prices of traded goods in the face of exchange rate changes is a well documented phenomenon in international economics this paper develops a structural model to identify the sources of this local currency price stability and applies it to micro data from the beer market the empirical procedure exploits manufacturers and retailers first order conditions in conjunction with detailed information on the frequency of price adjustments following exchange rate changes to quantify the relative importance of local non traded cost components markup adjustment by manufacturers and retailers and nominal price rigidities in the incomplete transmission of such changes to prices we find that on average approximately 60 of the incomplete exchange rate pass through is due to local non traded costs 8 to markup adjustment 30 to the existence of own brand price adjustment costs and 1 to the indirect strategic effect of such costs though these results vary considerably across individual brands according to their market shares

welfare costs of inflation in a menu cost model recent years have seen substantial prog ress in our understanding of pricing decisions at the micro level access to large scale data sources on prices of individual products has given us rich information on how frequently prices change by what magnitude and how the aggregation of price changes in individual firms maps into aggregate inflation see among many others mark bils and peter j klenow 2005 these facts about price movements are a key input in recent quantitative models of the aggre gate effects of nominal rigidities e g mikhail golosov and robert e lucas 2007 in this paper we use both the new facts and the new quantitative models to revisit an old question namely that of quantifying the welfare benefits of low inflation our model includes two

price dispersion and inflation new facts and theoretical implications abstract in workhorse macroeconomic models price dispersion is a central determinant of welfare the cost of business cycles optimal inflation and the tradeoff between inflation and output stability while price dispersion increases with inflation in the models this relationship is negative in the data due to sales prices the comovement of price dispersion and inflation for regular prices is positive a model with sales can quantitatively match the comovement in the data whereas a range of similar models without sales cannot even for regular prices these findings have important implications for welfare calculations optimal inflation and the effects of monetary shocks

search with learning from prices does increased inflationary uncertainty lead to higher markups aggregate cost uncertainty arising from real shocks or unanticipated inflation reduces the informativeness of prices by scrambling relative and aggregate variations but when agents can acquire additional information such increased noise may in fact lead them to become better informed and price competition will intensify we examine these issues in a model of search with learning where consumers search optimally from an unknown price distribution while firms price optimally given consumers search rules we show that the decisive factor in whether inflation variability increases or reduces the incentive to search and thereby market efficiency is the size of informational costs