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Baye Morgan Scholten (2006) - Information Search and Price Dispersion (view source)
Revision as of 20:31, 25 January 2010
, 20:31, 25 January 2010no edit summary
*There is a search cost <math>c\,</math> per price quote
*The customer purchases after <math>n\,</math> price quotes
*The final indirect utility of the customer is <center><math>V(p,M) = v(p) + M - cn\,</math></center>
'''A on the derivation of demand'''
Recall that <math>M=e(p,u)\,</math>, so that <math>v(e(p,u),p)=u\,</math> when the expenditure function is evaluated at <math>p\,</math> and <math>u\,</math>.
<center>
<math>d/dp(v(M,p)) = dv(M,p)/dm \cdot dM/dp + dv/dp = 0, \,</math>\\ where <math>dM/dp = de(p,u)/dp\,</math>.\\<math>\therefore q(m,p) = de(p,u)/dp = -frac{dv/dp}{dv(M,p)/dm}\,</math>\\<math>\therefore q(m,p) = -d/dp(v(p))\,</math>\\
</center>
