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Law Of One Price And Optimal Consumption-Leisure Choice Under Price Dispersion, Sergey V. Malakhov
Law Of One Price And Optimal Consumption-Leisure Choice Under Price Dispersion, Sergey V. Malakhov
Sergey Malakhov
If the demand under price dispersion is formed by consumers with zero search costs and consumers with positive search costs, the law of one price holds at the equilibrium price level, where the lowest willingness to pay between consumers with zero search costs meets the willingness to accept or to sell of consumers with positive search costs. Consumers with positive search costs maximize their utility with respect to their optimal decisions when marginal losses in labor income during the search are equal to marginal savings on purchase. Optimal decisions move their willingness to accept to the equilibrium price level. Suboptimal …