Randall Wright, Philipp Kircher, Benoit Julien, Veronica Guerrieri, 07 January 2018

Search models have vastly improved our understanding of important market events that are not explained by classical economic theory, but they tend to treat price formation as an afterthought. This column introduces a survey of the literature on ‘directed search’, which aims to keep the explanatory power of search models but allows for a meaningful role of prices in determining where people search for a trading partner.  

John Komlos, 24 July 2014

Many quantities fail to respond smoothly to price changes. This column stresses that the ‘endowment effect’ – a well-known behavioural economics concept – implies kinks in indifference curves at the current consumption bundle price. Such kinks may account for the stickiness of prices, wages, and interest rates.

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