Full price competition and Dupuit's defense of the long-and-short-haul “discrimination”

Condemnation of the long-and-short-haul discrimination has been nearly ubiquitous in the literature on economic theory and transportation. However, the French economist Dupuit developed a case against all transport regulation by relating it to a defense of the practice of place discrimination before the middle of the nineteenth century. He did so, moreover, within an early elaboration of a full price explanation of competitive functioning. This paper analyzes the idea in Dupuit's context and argues that this so-called form of price discrimination is actually an efficient and necessary form of the competitive process.     

China’s competition and the export price strategies of developed countries

This paper analyzes the impact of Chinese competition on developed countries’ export prices. The empirical application is on Italy, one of the main European manufacturing exporters with exports at high risk of competition from China. Our results show that, following China’s entry into the WTO, the price strategies of Italian firms has been affected. While in general the increasing Chinese export competition resulted in an upgrading of products exported, the impact has been different according to the sector and technological level. The incentives to upgrade have been stronger for low technology sectors, where competition is tougher and varieties of products sold lower. To highlight quality differentials, and isolate the effects on the different segments of the distribution of Italy’s export prices, we run quantile regressions. We find that are mainly those products sold at low prices to face a strong pressure to upgrade.     

Existence of equilibrium in the Helpman–Krugman model of international trade with imperfect competition

Helpman and Krugman (Market structure and foreign trade. Increasing returns, imperfect competition, and the international economy. MIT Press, Cambridge, 1985) provide a synthesis of the traditional factor proportions theory of international trade and the theory of international trade due to the exploitation of scale economies in imperfectly competitive markets. They derive illuminating results about trade patterns and gains from trade, among other things, leaving unanswered the question of existence of equilibrium, however. The central significance of their characterization of properties of free trade equilibria with inter-industry and intra-industry trade calls for an analysis of existence of equilibrium. This is the object of the present paper. We prove the existence of equilibrium for the integrated multi-sector multi-factor Helpman–Krugman economy without national borders. Well-known conditions ensure that the world economy under free trade reproduces this equilibrium and thus establishes existence of a free trade equilibrium. Since an equilibrium of the integrated economy is not necessarily unique, the same holds true for a free trade equilibrium.     

Explaining UK house price inflation 1971–89

An econometric analysis of UK house price inflation and changes in residential construction is presented for the period 1971–89, paying particular attention to the supply side of the housing market. The results of this analysis are used to examine the contributions of the various factors to the nominal rate of house price inflation. While the results confirm the importance of real disposable income in determining house prices, they indicate that supply variables may be of greater importance than interest rates in this respect. There are close similarities between the three housing booms of the 1970s and 1980s.     

A panel data approach to price–value correlations

Resorting to stationary and nonstationary panel data econometrics, we offer tests for “Ricardo’s 93% theory of value” for ten OECD countries over different time ranges. The theory does not find empirical support.     

Disinflationary boom in a price–wage spiral model

This paper analyses the impact of the disinflation policy timing on the sign and the magnitude of the sacrifice ratio in a modified price and wage staggered model of Blanchard (1986). When wages are updated every four quarters and prices every two quarters, we show that a “cold-turkey” disinflation is associated to an output boom when the policy is implemented during the last period of life of the wage contract and a recession in the other quarters.     

How is China's coke price related with the world oil price? The role of extreme movements

This paper focuses on the relationship between the world oil price and China's coke price, particularly with respect to extreme movements in the world oil price. Based on a daily sample from 2009 to 2015 and the ARJI-GARCH models and copulas, our empirical results show that China's coke price and the world oil price are characterized by GARCH volatility and jump behaviors. Specifically, negative oil price shocks lead to falls in China's coke returns on the following day while positive oil prices have no significant effects. In addition, current coke returns positively respond to the very recent oil price jump intensity, and a time-varying and volatile lower tail dependence is found between the world oil price and China's coke price. Our results are expected to have implications for coke producers and users and policy makers.     

Bayesian forecasting of electoral outcomes with new parties’ competition

We propose a new methodology for predicting electoral results that combines a fundamental model and national polls within an evidence synthesis framework. Although novel, the methodology builds upon basic statistical structures, largely modern analysis of variance type models, and it is carried out in open-source software. The methodology is motivated by the specific challenges of forecasting elections with the participation of new political parties, which is becoming increasingly common in the post-2008 European panorama. Our methodology is also particularly useful for the allocation of parliamentary seats, since the vast majority of available opinion polls predict at national level whereas seats are allocated at local level. We illustrate the advantages of our approach relative to recent competing approaches using the 2015 Spanish Congressional Election. In general, the predictions of our model outperform the alternative specifications, including hybrid models that combine fundamental and polls models. Our forecasts are, in relative terms, particularly accurate in predicting the seats obtained by each political party.     

Another look at competition: a regime–switching aproach

Measuring the level of competition in an industry is an empirical task with a lengthy history. Many of the traditional measures offer a snapshot of the industry, where the distribution of market share is examined at a given point in time. The purpose of this inquiry is to utilize a regime-switching model which highlights the importance of intra-industry movement. The empirical results suggest that even in an environment where the distribution of market share is improving, an industry can still be persistently dominated by the same collection of leading firms.     

Subsidy competition,industrial land price distortions and overinvestment: empirical evidence from China’s manufacturing enterprises

In China, offering inexpensive industrial land is a major means for local governments to participate in interregional subsidy competition, which caused regional industrial land price distortions. This article examines the effect of regional industrial land price distortions on the overinvestment of Chinese manufacturing enterprises. Chinese industrial enterprises data and land price monitoring data of 49 major cities in China between 1998 and 2007 are employed. This article has found that industrial land price distortions will significantly stimulate the overinvestment of manufacturing enterprises. Such a promoting effect varies among manufacturing enterprises of different ownership and industry attributes. Industrial land price distortions have the most significant promoting effect on the overinvestment of foreign-invested firms, followed by private firms, while state-owned enterprises are the least affected. Compared with private heavy-industry firms, industrial land price distortions have a more significant effect on the overinvestment of private light-industry firms. Compared with foreign-invested heavy-industry firms, industrial land price distortions have a more significant effect on the overinvestment of foreign-invested light-industry firms. This study represents a positive exploration and supplement to the existing studies on the effects of subsidy competition on corporate investment behaviours and the studies on Chinese-style subsidy competition.     

Forecasting business and consumer surveys indicators–a time-series models competition

The objective of this article is to compare different time-series methods for the short-run forecasting of Business and Consumer Survey Indicators. We consider all available data taken from the Business and Consumer Survey Indicators for the Euro area between 1985 and 2002. The main results of the forecast competition are offered not only for raw data but we also consider the effects of seasonality and removing outliers on forecast accuracy. In most cases, the univariate autoregressions were not outperformed by the other methods. As for the effect of seasonal adjustment methods and the use of data from which outliers have been removed, we obtain that the use of raw data has little effect on forecast accuracy. The forecasting performance of qualitative indicators is important since enlarging the observed time series of these indicators with forecast intervals may help in interpreting and assessing the implications of the current situation and can be used as an input in quantitative forecast models.     

Market forms and effective demand: Keynesian results with perfect competition ∗

In recent years there has been a flourishing of models with microfoundations based on imperfect (or monopolistic) competition that claim to yield Keynesian results which, it is held, are incompatible with perfect competi-tion. The paper shows that Keynes’s results do not depend on market forms but are contingent on his treatment of investment. In Keynes’s analysis, the existence of underemployment equilibria is demonstrated regardless of the assumed market form. Far from taking into account the importance of investment, recent models with ‘Keynesian results’ ignore investment altogether.

The article argues that if the investment demand function, with its distinctive characteristics, is removed, involuntary unemployment can be explained only by imperfections or rigidities that prevent producers from pushing their supply up to the level of full employment. A conclusion that Keynes wanted to avoid.

The introduction of a hypothesis of market forms different from imperfect competition may be useful in order to develop macroeconomics along more realistic lines, however, as the conclusions of the paper suggest, this hypothesis loses its analytical power if made separately from a satisfactory treatment of investment.     

University–firm competition in basic research: Simultaneous versus sequential moves

This paper studies the endogenous timing of moves in a game with competition in basic research between a university and a commercial firm. It examines the conditions under which the two entities end up investing in innovation at equilibrium, both under simultaneous and sequential moves. It argues that when the innovation process is not too costly, under any timing, the firm conducts research despite the opportunities for complete free-riding. The two sequential move games with either player as leader emerge as equilibrium endogenous timings, with both entities realizing higher profits in either outcome than in a simultaneous move game. Each entity also profits more by following than by leading. Finally, as a proxy for a welfare analysis, we compare the propensities for innovation across the three scenarios and find that university leadership yields a superior performance. This may be used as a selection criterion to choose the latter scenario as the unique outcome of endogenous timing.     

Canada–US productivity gap: The role of competition intensity differential

The relative lack of competitive pressure in product markets and lower investment in both fundamental and applied innovation are among the potential factors that have been put forward to explain Canada’s weak productivity performance with respect to the US. Since competition is generally seen as the single leading catalyst for fundamental and applied innovation, this paper analyzes the role of product market competition in the Canada–US productivity level gap. We develop an empirical framework in which competition exerts both direct and indirect effects on productivity, with the indirect impact coming through fundamental and applied innovation. We find statistically significant evidence that the competition intensity differential (between Canada and the US) has contributed to the Canada–US productivity level gap directly, as well as indirectly through lower investment in both R&D activities and M&E (including ICT) investment. We also find statistically significant evidence that Canada’s relatively poor performance in both productivity and M&E (including ICT) investment have acted as a self-reinforcing mechanism, which further causes detriment to the country’s productivity.     

On price taking behavior in a nonrenewable resource cartel–fringe game

We consider a nonrenewable resource game with one cartel and a set of fringe members. We show that (i) the outcomes of the closed-loop and the open-loop nonrenewable resource game with the fringe members as price takers (the cartel–fringe game à la Salant, 1976) coincide and (ii) when the number of fringe firms becomes arbitrarily large, the equilibrium outcome of the closed-loop Nash game does not coincide with the equilibrium outcome of the closed-loop cartel–fringe game. Thus, the outcome of the cartel–fringe open-loop equilibrium can be supported as an outcome of a subgame-perfect equilibrium. However the interpretation of the cartel–fringe model, where from the outset the fringe is assumed to be price taker, as a limit case of an asymmetric oligopoly with the agents playing Nash–Cournot, does not extend to the case where firms can use closed-loop strategies.     

Oil price–inflation pass-through in Romania during the inflation targeting regime

In the wake of the inflation-targeting strategy in Romania, we estimate the impact of international oil prices upon the consumer price index (CPI) and core inflation. The inflation target was systematically missed by the monetary authorities who explain this failure by exogenous factors. Using a frequency domain framework, we show that the oil price–inflation pass-through can be observed only for those components of inflation which include volatile prices and only in the medium run. Our results put forward that the constant missing of the target cannot be explained by the oil price–inflation pass-through and the credibility of the strategy is put into question.     

Does price dispersion increase with quality? Evidence from the online diamond market

This article empirically investigates the relationship between price dispersion and price level. Searches seem more valuable for products of high quality, but buyers may have little incentive to search since such products are less frequently purchased. The extent of price dispersion is examined using a sample of around 160 000 diamonds offered for sale online. Estimates from a two-stage econometric strategy show that price dispersion increases significantly with quality. An explanation is that buyers of high-quality gemstones pay little attention to the price of these diamonds and even more so if they perceive high prices as signals of quality and rarity of the diamonds they intend to purchase.     

Asymmetric farm–retail price transmission and market power: a new test

A finite mixture model is used to estimate farm–retail price transmission in the US fresh strawberry market. Results suggest two distinct pricing regimes associated with off- and peak-harvesting seasons. The market power parameter is significant in the peak-harvest regime, but not in the off-peak regime. Moreover, price changes are transmitted completely throughout the marketing channel in the off-peak regime when the market power parameter is zero, but not in the peak-harvest regime when the market power parameter is positive. This suggests that produce buyers are more apt to exercise market power when farm supplies are abundant than when they are scarce, and that the exercise of such power causes the farm–retail price linkage to become asymmetric.     

Input–output evidence on the relative price effects of total productivity shift

This paper provides empirical evidence on the relative price effects of a notional shift in total productivity using data from ten Symmetric Input–Output Tables of five European economies. The results suggest that the direction of the price-movements is, more often than not, governed by the (traditional) labour cost condition and this could be connected to the effective ranks of the matrices of the relative shares of the capital goods.