search query: @indexterm STEADY STATE MODELS / total: 14
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| Author: | Weitzman, M. L. |
| Title: | Price distortion and shortages deformation, or what happened to the soap? |
| Journal: | American Economic Review
1991 : JUN, VOL. 81:3, p. 401-414 |
| Index terms: | CONSUMER BEHAVIOUR PRICES COSTS INVENTORIES STEADY STATE MODELS WELFARE |
| Language: | eng |
| Abstract: | A formal model of consumer behaviour under conditions of shortages is presented. This model generalizes the classical theory of consumer behaviour to the more general case of prices that are not necessarily market-clearing. It is shown that, in addition to the money cost, some sort of search, waiting, or other quasi-fixed "effort-cost" is needed to obtain goods. Some effects of quasi-costs on inventory policy are demonstrated. Stock hoarding, a critical phenomenon in the economics of shortage, emerges as a natural component of this model. A complete characterization of a stationary shortage equilibrium is given. Comparative statics and welfare analysis are performed. The dynamic transition between steady states is analyzed. |
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