The choice of numeraire,capital intensity uniqueness,and the reswiritching of techniques

This paper examines the condition for capital-intensity uniqueness and the phenomenon of reswitching of techniques in a two-sector linear capital model when the prices and wages are measured in terms of the value of net output per man (the Sraffa numeraire). It is shown that when the Sraffa numeraire is used, a) the capital-intensity condition is not sufficient to ensure a unique relationship between the value of capital per man and the rate of profit; and b) reswitching of techniques is possible even if there is only one capital good in the system. The results arise only from the interaction between the price and composition effects in the model using the Sraffa numeraire.     

Numeraire choice in agricultural supply analysis

Should the choice of numeraire price for modelling profit functions be arbitrary, or is more careful study needed? Here, the choice of numeraire is examined using tests for models specification and out-of-sample predictive accuracy based on the crop and livestock data obtained from Iowa. The results of this study indicate that, for this data set and functional form, it does indeed make a difference which numeraire you choose. This is in contrast to previous studies which, in general, indicated that the choice of numeraire equation is arbitrary or, more commonly, offered no justification for the netput chosen.     

On supply-constrained equilibria

The paper gives sufficient conditions for the existence of an equilibrium with price rigidities and quantity rationing where: (i) demand is never rationed; (ii) net trades of an a priori chosen numeraire are never rationed; and (iii) supply is rationed only when relative prices are downward rigid.     

Keynesian unemployment as a nash equilibrium with endogenous wage/price setting: An example

A simple 3 good, 1 consumer, 1 firm model of fixed price, quantity constrained equilibrium is developed. A game is then defined on the set of (globally unique) equilibria. The consumer sets the money wage, the firm sets the money price of output (money is numeraire). Nash solutions of the game exist and may involve Keynesian unemployment but never involve Classical unemployment or Repressed inflation.     

Price mimicking under cost-of-service regulation: the Swedish water sector

This study provides an empirical test of price mimicking among publicly owned water utilities. Using a fixed effects spatial Durbin model with data from Swedish municipalities during 2002–2012, I estimate the elasticity of the own relative to neighbors’ average price to 0.14. This behavior can be explained in terms of an informal yardstick competition: when consumers use neighboring municipalities’ prices as benchmarks for costs or as behaviorally based reference prices, policy makers will face the risk of consumer complaints and reduced voter support if deviating too much from neighboring municipalities’ prices. Further, I find some evidence that price mimicking is more pronounced in municipalities where voter support for the ruling coalition is weak.     

Some Implications of Imperfect Competition For Recent Trade Theory*

This paper argues that in a general-equilibrium context, it is not sensible for oligopolistic (and mono-polistically competitive) firms to maximize profit, because the outcome would be sensitive to the choice of the numeraire. the natural objective of these firms would be to maximize the utility of the shareholders if the shareholders are identical. I show that even if each firm takes the representative individual's marginal utility of income as given, the outcome of the utility maximization objective is Pareto optimal, and in equilibrium, each firm equates price with marginal cost.     

Demand Uncertainty, Incomplete Markets, and the Optimality of Rationing

When the arrival of traders at the market is stochastic, and it is impossible for traders who might arrive to meet ex ante, then Walrasian spot-market clearing presents consumers with price-risk and is typically not Pareto optimal. Instead, with an indivisible good and a divisible numeraire, the first-best can be achieved by an “Exchange” selling raffle tickets at a fixed price. When only spot market trading is feasible and consumers cannot commit to pay unless they purchase the indivisible good, efficiency implies price-fixing with rationing. Potential disadvantages of black markets and scalping are discussed.Journal of Economic LiteratureClassification Numbers: D45, D52, D8.     

Asymmetric Information and Adverse Selection in Mauritian Slave Auctions

Information asymmetry is a necessary prerequisite for testing adverse selection. This paper applies this sequence of tests to Mauritian slave auctions. The theory of dynamic auctions with private and common values suggests that when an informed participant is known to be active, uninformed bidders will be more aggressive and the selling price will be higher. We conjecture that observable family links between buyer and seller entailed superior information and find a strong price premium when a related buyer purchased a slave, indicative of information asymmetry. We then test for adverse selection using sale motivation. Our results indicate large discounts on voluntary as compared to involuntary sales. Consistent with adverse selection, the market anticipated that predominantly low-productivity slaves would be brought to the market in voluntary sales.     

A Cointegrating approach to budget deficits and long-term interest rates

A cointegrating approach is undertaken in this study to determine if there is a long-run equilibrium relationship between budget deficits and long-term interest rates for the United States and nine European countries. The cointegration approach consists of conducting cointegration tests and then testing several hypothesized values for the deficit and price expectations variables. The cointegration results suggest the existence of several significant cointegrating vectors for each of the ten countries, which would seem to appeal to the view of budget deficits having a positive impact on long-term interest rates. The hypothesized values for the deficit and price expectations variables are found to be too strict since the hypotheses are rejected in every case but one.     

Does the Law of One Price Hold within the EU? A Panel Analysis

This paper empirically tests the law of one price by applying unit root tests to three panels consisting of data on 90 consumer price indices for the EU-25, the EU-15 and the 10 new EU member countries that joined the EU in 2004. The four major findings of this paper are: (1) panel unit root tests find evidence of price convergence for about 70% of all product groups, (2) the results are sensitive to the choice of the numeraire country implying that any conclusions must be based on all bilateral combinations, (3) the average half life across all product groups is 2.0 years, (4) the overall evidence for the law of one price is weaker in the 10 new EU member countries than in the EU-15.

The monopolist is not the best environmentalist’s best friend: An example

This letter addresses the second-degree price discrimination issue when a monopolized product is tied with environmental quality. The monopolist may degrade environmental quality too much when marginal valuations of environmental quality and the good itself are positively related across consumers.     

Location,location, location: currency effects and return predictability?

Most international financial market studies that compare across countries utilize the US dollar as the common numeraire. We explore the little studied question of the appropriate choice for the base currency and ask if currency choice can affect the final conclusion of whether predictability exists. We provide empirical results for stock return predictability that demonstrate the importance of the numeraire. For example, the existence (absence) of predictability for a US investor does not necessarily imply the existence (absence) of predictability for other foreign investors.     

The law of one price cannot be rejected: Two tests based on the tradable/nontradable price ratio

In contrast to conventional, disaggregative testing of the law of one price, this study adopts an aggregative approach. Using a tradable/nontradable level of aggregation, a model is developed to test equality of the prices of tradables and nontradables domestically and equality of the price of tradables internationally. The disaggregative approach exhibits biases that lead to rejection of the law of one price. In contrast, the results of the aggregative technique for the law of one price are strongly positive and the limitations of the approach are found not to overcome its findings.     

Dynamic Model for Market Competition and Price Rigidity

This article presents a price floor model in which durability, unit costs and production period are factors in explaining price rigidity. This article elaborates that cost structure plays an essential role in resolving the inconclusive relationship between market concentration and price rigidity. When the industry is characterized by decreasing returns of scale, the degree of price flexibility decreases as market competition intensifies. The reverse is true when the industry exhibits increasing returns of scale. The factors that cause price rigidity also foster price adjustment asymmetry and price adjustment lag. During times of recession, the model exhibits upward price flexibility as costs increase, but downward price rigidity as costs decrease. Even under forward-looking expectations, the way in which firms adjust prices could look as though they have adaptive expectations. If price stickiness is a characteristic of market competition, then public policies determined by price level could be too drastic for firms in competitive markets.     

中国粮食最低收购价合理确定机制研究

粮食的最低收购价水平过低或过高都会带来不利影响.保持合理的粮食最低收购价水平有利于粮食生产的稳定.确定农产品支持价格可依据每种粮食生产要素应该得到的适当补偿来确定我国的粮食最低收购价水平.     

Measured anxiety affects choices in experimental “clock” games

We measure anxiety by skin conductance response (SCR) in an economic setting. In “clock” games, six agents receive private signals when an asset's price exceeds its fundamental value. They can sell for immediate value or wait to sell at a higher value. Waiting is risky because the price crashes to a lower value when three agents sell. Anxiety could lead people to sell too quickly when the game is played dynamically over time, compared to a static version with precommitted selling. Empirically, delays are shorter in dynamic games than in payoff-equivalent static games, and are associated with anxiety as measured.     

The role of excess capacity in determining market power in natural gas transportation markets

The approval by FERC of a regulated natural gas pipeline’s market-based rate application depends upon the availability of substitute pipelines with sufficient capacity to maintain the current transport price. But how much alternate capacity is enough? Clearly, the price will not increase when alternate pipelines have unsubscribed capacity equal to the capacity of the applicant pipeline, since the applicant’s capacity is then perfectly substitutable. And indeed, FERC has approved market-based rates when this “complete-replacement” criterion has been met. However, complete-replacement is too stringent a condition and we determine precisely how much alternate capacity suffices to keep the price from rising.     

利率上调对中国住房市场影响的动态分析

构建一个简单的住房需求供给模型,从未预测到中国人民银行对利率上调和已预早测到中国人民银行要对利率进行上调两方面来分析利率上调对中国住房市场的影响。研究结果表明,利率上调通过影响住房市场供求和房租这两个途径来影响中国的住房市场,并且当住房价格上升过快时,利率上调可以作为一个调控中国房价的有效手段。     

Price convergence in an online virtual world

This paper tests for the existence of price convergence using a unique data set from the largest online game, World of Warcraft. It provides a controlled setting without the usual obstacles that make testing price convergence difficult. These difficulties include trade barriers, transportation costs, imperfections and restrictions in capital markets, and differences in productivity growth. The data set consists of eight structurally identical copies, or worlds, of a virtual macroeconomy. We use the non-linear convergence test developed by Phillips and Sul (Econometrica 75(6):1771–1855, 2007), and find price convergence in all eight worlds. We further develop our own simple band of inaction test for price convergence, and under reasonable parameters find price convergence in all eight worlds.