Equilibrium Price Dispersion with Consumer Inventories

A model with two types of consumers, shoppers and captives, is constructed that leads to an equilibrium price dispersion. Shoppers may hold inventories of the good; the level of consumer inventories leads to state-dependent price dispersions. It is shown that prices and quantities display negative serial correlation. The model is tested using grocery store data, which display the predicted correlations. Journal of Economic Literature Classification Numbers: D43, L13, D83, L81.     

Pro‐Consumer Price Ceilings under Regulatory Uncertainty*

We examine optimal price ceilings when the regulator is uncertain about demand and maximizes expected consumer surplus. With perfect competition, if regulatory uncertainty is large enough, then softer intervention is called for, with the price ceiling set at a relatively high level compared with a full information scenario. In an imperfectly competitive setting where symmetric firms compete in supply functions, with large enough uncertainty, the optimal ceiling increases with the degree of competition, so greater competitive pressure justifies less restrictive regulation. Under perfect competition, we also determine a cut‐off level of rationing efficiency below which a price ceiling should not be used.     

Price Dispersion and the Role of Stores*

In this paper, we study price dispersion in the Norwegian retail market for 766 products across 4,297 stores over 60 months. Price dispersion for homogeneous products is significant and persistent, with a coefficient of variation of 37 percent for the median product. Price dispersion differs between product categories and over time. Store heterogeneity accounts for 30 percent of the observed variation in prices for the median product–month, and for around 50 percent for the sample as a whole. Price dispersion is still prevalent after correcting for store heterogeneity.     

The Speed and Stability of Price Adjustment in Australian Manufacturing*

A model of industry speed of price adjustment is derived from firm pricing behaviour. The model is applied to quarterly two‐digit Australian manufacturing data for the period 1985 (Q3) to 2002 (Q3). The results suggest that the industry speed of price adjustment is positively related to the average size of large firms within the industry and is negatively related to industry concentration. We also find that import share has a role in attenuating the effects of industry concentration and that growth in a moving average of real gross domestic product reduces the speed of price adjustment. Calculated industry speeds of price adjustment are both stable across the period of examination and small, suggesting that manufacturing prices are sticky.     

An Unequal Spatial Structure of Location and Price with Consumer Density*

This paper incorporates the interdependent relationship of firms and the increasing consumer density into a framework of spatial equilibrium analysis, and studies the location of firms and the price system on a plane market. As consumer density increases, symmetric equilibrium is established initially for the first- and the second-round entry of firms, but this equilibrium becomes unequal later for the third and the fourth rounds. This fact means that in spatial equilibrium, even if all firms sell identical goods on a plane market, mill prices and market area sizes will differ.     

略论生态消费品价格

生态消费品价格是生态消费发展研究的重要理论命题之一。在生态消费品与普通消费品并存的中国经济转型期,如何科学而合理地制定生态消费品与普通消费品之间的比价关系和差价关系显得尤为重要。本文重点探讨：生态消费品价格的理论基础;生态消费品价格在国际运行中的决定因素;中国推行生态消费品价格的对策措施。     

Equilibrium Price Dispersion in a Matching Model with Divisible Money*

The main purpose of this article is to show that, for any given parameter value, an equilibrium with dispersed prices (two‐price equilibrium) exists in Green and Zhou's matching model with divisible money. The welfare effect of price dispersion is also analyzed.     

VERs and Price Undertakings under the WTO*

Under the rules of the WTO, governments are prohibited from negotiating voluntary export restraints (VERs) but may negotiate price undertakings (i.e. import price minima). While these two policies can have identical effects in models of perfect competition, they can have very different economic consequences with imperfect competition. The model presented here shows that in a model of international Bertrand duopoly, a VER can result in lower domestic prices and profits than a price minimum regime. This suggests that price undertakings should also be prohibited under the WTO.     

Money and Price Dispersion

We relax restrictions on the storage technology in a prototypical monetary search model to study price dispersion. In this case, buyers and sellers enter matches with potentially different willingness to trade. Across the distribution of possible bilateral matches, prices generally will differ even though agents have identical preferences and technologies. We provide existence conditions for a particularly simple equilibrium pattern of exchange. We prove that in the limiting case where search frictions are eliminated, equilibrium prices are uniform. We also show that a higher initial money stock can raise the average price level and increase price dispersion.     

Ethnic Networks and Price Dispersion

We offer and test a model linking ethnic networks to global price dispersion which predicts lower price dispersion as shared ethnic populations between countries rise, effects that may reverse at higher levels as network discipline breaks down. Using Chinese, Indian and Japanese data, we find that country pairs linked by the Chinese network have significantly lower mean price dispersion. A one standard deviation increase in the size of the Chinese coethnic network lowers price dispersion by 6–33%, an effect that reverses as the network gets large. No such evidence exists for the Indian or Japanese networks.     

Determinacy and Stability under Learning of Rational Expectations Equilibria

This paper studies relationships between the local determinacy of a stationary equilibrium in the perfect foresight dynamics, and its local stability in dynamics arising from econometric learning procedures. Attention is focused on linear scalar economies where agents forecast only one period ahead, and with an arbitrary, but fixed, number of predetermined variables. In such a framework, it is well known that there are no clear links between the determinacy of the stationary state in the perfect foresight dynamics on the levels of the state variable, and its stability under learning. The paper emphasizes, however, that this is not the right perfect foresight dynamics to look at whenever agents try to learn the coefficients of the perfect foresight dynamics restricted to an eigenspace of lower dimension. Indeed the paper introduces a growth rate perfect foresight dynamics on these coefficients and proves equivalence between determinacy in that dynamics and stability under learning provided that a simple sign condition is satisfied. Journal of Economic Literature Classification Numbers: E32, D83.     

Goods and Services Tax Effects on Goods and Services Included in the Consumer Price Index Basket*

This paper quantifies the magnitude and duration of the goods and services tax (GST) effect on the quarterly growth rate of the 11 groups of the consumer price index (CPI) in Australia using the Box and Tiao intervention analysis. It was found that prices did not increase significantly before or after the introduction of GST, beyond what could have been expected on the basis of the discernible systematic pattern of fluctuation in the data. Furthermore, the varying one-off effect of GST on prices was significant in seven out of 11 CPI groups; the effect was found insignificant for the other four CPI groups.     

Learning and Noisy Equilibrium Behavior in an Experimental Study of Imperfect Price Competition*

We consider a duopoly pricing game with a unique Bertrand–Nashequilibrium. The high‐price firm has a nonvanishing market share, however, and intuition suggests that observed prices may be positively related to this market share. This relationship is implied by a model in which players make noisy (logit) best responses to expected payoff differences. The resulting logit equilibrium model was used to design an experiment in which the high‐price firm's market share varies. The model accurately predicts the final‐period price averages. A naive learning model predicts the observed differences in the time paths of average prices.     

The Formation of Consumer Inflationary Expectations in Australia*

This paper analyzes the quantitative price expectations of consumers as obtained from consumer surveys. Price expectations are considered as functions of (i) past rates of inflation (ii) other economic variables, and (iii) consumer sentiment variables. The dominant influence on expectations is the most recent change in the consumer price index. Wage-indexation decisions and changes in the money supply also exert a significant influence on mean expectations. The variability of price expectations across consumers is proportional to the mean level of expectations.     

A New Test of Price Dispersion

In recent years considerable attention has been devoted to differences across countries in the institutional environments in which corporations operate, and the consequences of these institutional differences for corporate performance. In this paper we test for the presence of differences in corporate performance across 38 countries, and in particular whether these differences are related to the types of legal systems existing in each country. To measure corporate performance we estimate returns on investment relative to company costs of capital in each country. We find significant differences in the investment performance of corporations across our sample of countries. Companies in countries with English-origin, common law legal systems perform significantly better on average than do those in civil law systems.     

Temporary Protection and Technology Choice under the Learning Curve*

This paper examines the effects of temporary protection in a model of Cournot competition under the learning curve. We show that when the protected firm can choose among multiple technologies subject to different scopes for learning, protection may hurt the long‐run competitiveness of the firm by inducing it to choose a technology with little scope for learning.     

通货膨胀、信息搜寻成本与价格分散

在人们为了交易动机而持有实际货币余额中,至少有一部分是为了寻找较低价格而产生的对信息搜寻行为的一种投入。在这一假设下,通货膨胀和价格分散之间存在正的相互作用。许多实证研究都支持了这一观点。