ANOTHER LOOK AT PRICE INSTABILITY AND CONSUMER WELL-BEING: NONDURABLE AND DURABLE (HOUSING) MARKETS

Abstract

We explore the implications of future price uncertainty, although in a different setting from McKinnon (1967). We identify a further, hitherto-overlooked mechanism that can overturn the well-known ‘Waugh paradox’ that risk-averse consumers benefit from price instability, and show that it also has a particularly interesting application to the housing tenure choice issue.