Price behaviour in the Italian manufacturing industry

This paper sets out to test the hypothesis that the price-cost margins of Italian manufacturing industries are influenced by excess domestic demand and by international prices of manufactured products. Using annual data (1956–1982) a mark-up equation is estimated for each of the twelve industries in which the manufacturing sector has been disaggregated. The ratio of industry price to average total cost is functionally related to the ratio of international price to domestic cost and a measure of excess demand. On the basis of the estimates, which are obtained by Maximum Likelihood techniques, and some specification tests, it is concluded that both factors influence pricing behaviour although their effect is not uniformly significant in every sector.     

Modelling price pressure in financial markets

We present experimental evidence that, unlike traditional assumptions in economic theory, security prices do not respond to pressure from their own excess demand. Instead, prices respond to excess demand of all securities, despite the absence of a direct link between markets. We propose a model of price pressure that explains these findings. In our model, agents set order prices that reflect the marginal valuation of desired future holdings, called “aspiration levels.”In the short run, as agents encounter difficulties executing their orders, they scale back their aspiration levels. Marginal valuations, order prices, and hence, transaction prices change correspondingly. The resulting price adjustment process coincides with the Global Newton Method. The assumptions of the model as well as its empirical implications are fully borne out by the data. Our model thus provides an economic foundation for why markets appear to search for equilibrium according to Newton’s procedure.     

The Cyclical Effects of Incremental Export Subsidies*

The Crawford Committee on structural adjustment in Australia recommended a subsidy to be paid on the excess of manufacturing export revenues over the average of some number of previous years. Schemes, of this nature have been used in New Zealand. Pakistan, Singapore and elsewhere, and may produce a regular cycle in exports and in domestic prices and quantities. A subsidy-induced cycle is unlikely to be avoided in most Australian manufacturing export industries, except under conditions of rapid inflation or productivity -growth. The cyclical pattern can be avoided, at some cost to the Treasury, by setting the subsidy base at some fraction of actual past performance.     

A 'pricing-to-market' model with unobserved variables: explaining New Zealand's import prices

A model of ‘pricing-to-market’ (PTM) behaviour in import prices is developed for a small open economy to allow for two measurement problems: (i) that neither the marginal production cost of imported goods nor their corresponding (foreign-currency) export price are observable by the econometrician; (ii) that PTM behaviour, if it exists, alters the relationship between foreign countries' export price indices for total exports and the true, unobservable price index. The analysis shows that variations in the measured markup on import prices depends on the degree to which domestic demand is synchronized with world demand, whether bilateral exchange rate movements are due to domestic or foreign factors, and on the degree to which PTM behaviour differs from such behaviour in other countries. Equations estimated for the price of New Zealand (NZ) imports from the US strongly supports the model, and finds that the degree of PTM by US exporters in response to price and exchange rate movements is substantially greater in NZ than the average for other countries. However, the degree of PTM in NZ in response to excess demand is similar to that of other countries.     

Price Adjustments by a Gasoline Retail Chain

We use daily data to examine price responses in the Swedish gasoline market to changes in the Rotterdam spot price, exchange rates and taxes. The distribution of price adjustments by a leading retail chain, for the period January 1980 to December 1996, is symmetric with no small adjustments. An error correction model shows that, in the short run, prices gradually move towards the long-run equilibrium in response to cost shocks. There is some evidence that, also in the short run, prices are stickier downwards than upwards. Prices respond more rapidly to exchange rate movements than to the spot market price. Our analysis emphasizes that to fully understand price adjustments it is necessary to examine data sets where the sample frequency at least matches that of price adjustments.
JEL classification: C 22; E 31; F 14; L 71     

The relationship between the costs and prices of a multi-product monopoly: The role of price-cap regulation

This paper examines the role of price-cap regulation in influencing the relationship between the costs and prices of a multi-product monopoly. Based on a simple model of mark-up pricing, a combination of analytical and numerical analysis is used to show how cost increases among the firm's products can cause a divergence of prices from the Ramsey structure if the cost increases are non-uniform or if the demand elasticities for the products are non-uniform. However, in the absence of additional cost changes, profit-maximising prices which are subject to a price-cap constraint converge to the Ramsey structure if the previous period's quantities are used as weights in the firm's price-cap constraint. Consequently, given this formulation of the firm's price-cap constraint, only in situations of recurring cost changes are prices likely to show on-going divergence from the Ramsey structure.This paper reports on research funded by the Australian Electricity Supply Industry Research Board. I am grateful to two anonymous referees for their helpful comments on previous versions.     

Determinants of cyclical properties of the price-cost margin in US manufacturing industries

Supergame theoretical predictions tell that oligopoly pricing may be procyclical or counter-cyclical. Industry by industry analysis shows that the speed of industry growth and the size of fixed cost are crucial in distinguishing characteristically counter-cyclical industries from procyclical industries. Counter-cyclical industries are characterized by high growth of demand and low fixed costs. Procyclical industries are characterized by low growth of demand and high fixed costs.     

An evaluation of excess demand,actual cost and normal cost pricing hypotheses using non-nested tests

This paper has emperically analyzed three versions(zero lag,geometric lag and almon lag) of three price change hypotheses – namely the excess demand, actual cost and the normal cost hypothesis – the goal being to select the hypothesis that describes the underlying price dynamics for manufactured goods. The rival models are specified as non-nested alternatives and each version is estimated by using an efficient estimator. The traditional discrimination criteria which clearly reject the zero lag version, are found to be impotent in discriminating between the dynamic versions of the models. A sequential cross-evaluation of the two dynamic versions using both pairwise and multiple non-nested hypothesis tests proposed by Davidson and MacKinnon reveals a systematic domination by the almon version of normal cost pricing over both the excess demand and the actual cost pricing mechanisms in the Canadian manufacturing sector during the period 1961:1–87:4. This result is robust under alternative specifications of the desired stock of inventories for the excess demand model. The finding implies that short–run variations in demand conditions or in actual unit costs arising from temperoary changes in productivity may not paly a significant role in manufactured goods pricing decisions.     

HOW TO MEASURE LIVING STANDARDS AND PRODUCTIVITY

I set out a general algorithm for calculating true cost‐of‐living indices when demand is not homothetic and when the number of products may be large. The non‐homothetic case is the important one empirically (Engel's Law). The algorithm can be applied in both time series and cross section. It can also be used to estimate true producer price indices and Total Factor Productivity in the presence of input‐biased economies of scale and technical change. The basic idea is to calculate a chain index of prices but with actual budget (cost) shares replaced by compensated shares, i.e. what the shares would have been if consumers (firms) faced actual prices but their utility (output) were held constant at some reference level. The compensated shares can be derived econometrically from the same data as are required for the construction of conventional index numbers. The algorithm is illustrated by applying it to estimating true PPPs for 141 countries and 100 products within household consumption, using data from the World Bank's latest International Comparison Program.     

War,terror, and the tourism market in Israel

A supply and demand model of the Israeli hotel industry is developed, distinguishing between its domestic and foreign sectors. Model simulations are employed to examine the impacts of war and terrorist incidents on tourist activity and hotel revenues. Foreign demand for Israeli hotel stays is highly price-elastic and income-inelastic, and moderately sensitive to terrorist events. Domestic demand is price-inelastic, income-elastic, and terror-insensitive. In the wake of terror attacks, hotels' supply or minimum prices to Israeli tourists shift downward, reducing local market prices and encouraging more local tourism. However, the magnitude of these shifts is minor, and the local market thus provides little buffer for dropoffs in foreign tourism. By permitting excess capacity in such fashion, hotels respond rationally to the price inelasticity of local demand.     

Efficient price and capacity choices under uncertain demand: An empirical analysis

Traditional economic analyses of the peak-load problem typically assume an unrealistic degree of regularity in demand during well-defined peak and off-peak periods. This issue is addressed through a comprehensive statistical model that separates demand into its systematic and stochastic components. This model is combined with a traditional economic model and applied to local telephone service, leading to substantive conclusions relevant for managerial decisions as well as further research, among them:

? Neglecting the systematicand stochastic structure of demand may lead to inefficient tariffs. Efficient measured service structures typically price individual callsbelow incremental capacity cost.

? Industry wide capacity decision rules that are exclusively driven by blockage probability targets during narrowly defined time periods may be economically inefficient.

? For telephone service, spot pricing, which sets high prices during periods ofactual congestion, has the potential to be considerably more efficient than traditional tariffs that set high prices during periods ofexpected congestion.

     

A note on non-parametric tests of consumer behaviour

This note extends the Afriat-Diewert-Varian conditions for consistency of demand data with the maximization hypothesis to the case where the choice set is a finite union of convex sets. Applications include models with discrete goods, regressive taxes, decreasing block prices and fixed costs.     

Market structure and pricing behaviour in Austrian manufacturing

The paper provides a formal model of price rigidities which is consistent with the observed difference in pricing across industries. The empirical test for a sample of Austrian manufacturing industries confirms the derived propositions. Concentration, inventoriability, export orientation, and disparities in firm size do not influence the price level directly but are shown to have an impact on the sensitivity of prices to demand and cost changes. Cost (demand) changes are less (more) fully transmitted into prices in concentrated industries.I am indebted to the participants of the Industrial Organization Conference held in Vienna in June 1992 and especially to Helmut Schuster and Karl Aiginger for valueble comments.     

Market Structure Dynamics in Indian Industry

Can changes in industry structure be characterized by movements towards a long-run concentration ratio (CR)? This paper estimates an error correction model for 33 industries in India for the period 1974–85, using nonlinear estimation methods. The results indicate that structural change in India is composed both of significant changes towards the long-run CR and of significant changes of the long-run CR. The adjustment towards the long-run CR seems to be faster in India than in most Western studies. In spite of this, it is below 0.5 in most industries, indicating that even after 11 years, all the difference between actual and long-run CRs is not eroded and ‘excess’ market shares persist in most industries. Across industries, speeds of adjustment are higher in industries with high profit margins and lower in industries which are reserved for the public sector.     

THE MONEY DEMAND FUNCTION FOR THE EURO AREA: SOME EMPIRICAL EVIDENCE

This paper sets out to re‐examine the money demand function for the euro area. Traditional specifications often yield unsatisfactory results: instability of short and long‐term coefficients; relatively large differences between estimated and actual value of variables; and significant changes in the number of long‐term relationships, etc. Using a standard Vector Error Correction Model, we find that the usual specification is indeed unstable. However, introducing a European equity price gives rise to a more stable system. Furthermore, recursive estimates confirm the relative stability of long‐term coefficients. Estimates of the real money gap, based on the money demand equation including equity prices, point to moderate, albeit persistent, excess liquidity in the euro area in recent years. The real money gap contains information about future inflation but this content may have diminished since 2001.     

A Partial Equilibrium Analysis of Trade with Decreasing Transport Costs

Decreasing transport costs are incorporated in the standard partial equilibrium analysis of trade by allowing the divergence—introduced by transport costs—between export and import price to decrease with the volume of trade. When the excess demand (supply) curve is steeper than the long run average cost curve for imports (exports), we observe that an import (export) tariff raises (lowers) the domestic price by an amount exceeding the tariff. Further, when the excess demand (Supply) curve is less steep than the long run average cost curve for imports (exports), the possibility exists that an import (export) tariff may lower (raise) the domestic price. These results lead to the important conclusion that tariffs cannot be used as measures of nominal protection across industries. [F10]     

Household response to dynamic pricing of electricity: a survey of 15 experiments

Since the energy crisis of 2000–2001 in the western United States, much attention has been given to boosting demand response in electricity markets. One of the best ways to let that happen is to pass through wholesale energy costs to retail customers. This can be accomplished by letting retail prices vary dynamically, either entirely or partly. For the overwhelming majority of customers, that requires a change out of the metering infrastructure, which may cost as much as $40 billion for the US as a whole. While a good portion of this investment can be covered by savings in distribution system costs, about 40% may remain uncovered. This investment gap could be covered by reductions in power generation costs that could be brought about through demand response. Thus, state regulators in many states are investigating whether customers will respond to the higher prices by lowering demand and if so, by how much. To help inform this assessment, this paper surveys the evidence from the 15 most recent pilots, experiments and full-scale implementations of dynamic pricing of electricity. It finds conclusive evidence that households respond to higher prices by lowering usage. The magnitude of price response depends on several factors, such as the magnitude of the price increase, the presence of central air conditioning and the availability of enabling technologies such as two-way programmable communicating thermostats and always-on gateway systems that allow multiple end-uses to be controlled remotely. In addition, the design of the studies, the tools used to analyze the data and the geography of the assessment influence demand response. Across the range of experiments studied, time-of-use rates induce a drop in peak demand that ranges between 3 and 6% and critical-peak pricing (CPP) tariffs induce a drop in peak demand that ranges between 13 and 20%. When accompanied with enabling technologies, the latter set of tariffs lead to a reduction in peak demand in the 27–44% range.     

Revisiting the demand for money model: money and loans in selected manufacturing industries

Using a dynamic infinite horizon optimizing model, it is shown that the empirical demand for money equation employed by a generation of applied monetary researchers is a reduced form model of the dynamic Euler equations for real money balances. The Euler equations derived in this paper focus on the finance capital for the firm and consist of real money balances (M1) and real business loans (F1) for selected manufacturing industries. By employing explicit structural dynamic specification and sectoral disaggregation, the question of how firms close the gap between desired real money balances and actual real money balances is examined. Model consistent ‘desired’ levels of money balances and business loans are found to depend not only upon the usual transactions variable and interest rate but also upon relative prices and a technology index. Moreover, the speed in closing the gap between desired and actual money balances (loan balances) is estimated using annual two-digit Standard Industrial Code data for durable and non-durable industries. Non-durable industries tend to close the gap faster than durable industries by as much as 25% in a given year.     

我国城市劳动力市场的就业效率

本文借助协整分析、面板数据模型等方法和工具，运用劳动部门公布的全国部分城市劳动力市场供求情况的数据和国家统计局公布的经济运行的相关数据，分析经济形势的变化对劳动力市场的影响，发现我国的经济增长与城市劳动力市场的求人倍率之间存在着较为稳定的均衡关系，发展第三产业是吸纳更多劳动力的有效途径，各行业投资吸纳就业的能力没有差别，因此，着重投资于居民服务和其他服务业等行业，可以有效引致更多劳动力需求。     

Optimal Pricing and Price-Cap Regulation in the Postal Sector

This paper studies the optimal price structure in the postal sector when worksharing is available (e.g., for collection, sorting and transportation) and when the operator faces a break-even constraint. Users differ in opportunity and cost to engage in worksharing. We determine the optimal worksharing discount and provide sufficient conditions (on demand functions) under which it exceeds the ECPR level. Furthermore, we show that the optimal prices can be implemented through a global price cap imposed on a weighted average of the prices of all products. The appropriate weights are proportional to the market demand (evaluated at optimal prices) of the corresponding products.