Working Paper: NBER ID: w27724
Authors: Ricardo Lagos
Abstract: I generalize the "noisy search" model of Burdett and Judd (1983) to settings where individual buyers have preferences over the number of other buyers who visit the same seller as them. I consider a version in which buyers have a preference for social distancing derived from the risk of contracting a disease from other buyers, and use it to study the two-way equilibrium interaction between supply-side considerations (such as the distribution of prices posted by sellers) and individual buyers' behavioral responses to the risk of contagion. I find that the price response to the buyers' shift toward social distancing can be an important determinant of the degree to which buyers' individual behavioral responses to the risk of contagion can mitigate the spread of the disease.
Keywords: No keywords provided
JEL Codes: D43; I12
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| Buyers' preferences for social distancing (R20) | Utility buyers associate with purchasing goods (L97) |
| Utility buyers associate with purchasing goods (L97) | Sellers' profits (D41) |
| Utility buyers associate with purchasing goods (L97) | Distribution of prices (D39) |
| Buyers' preferences for socializing (D16) | Competition among sellers (D41) |
| Buyers' preferences for social distancing (R20) | Competition among sellers (D41) |
| Increased socialization (Z13) | Sellers lower prices (D40) |
| Preferences for social distancing (C92) | Sellers increase prices (D49) |
| Buyers' preferences (D11) | Market equilibrium (D53) |