Corporate hedging and input price risk

Input price variability is an important source of risk for corporations that process raw commodities. Models of optimal input hedging are developed in this paper based on the maximization of managerial expected utility. The relationship between hedging strategies and output decisions is examined to assess the impact of the ability to set output prices on futures market participation. As a firm's ability to set output prices diminishes in the short run, input futures positions increase although the optimal hedge ratio may either increase or decrease. For a perfectly competitive firm, however, shifts in output price caused by input price changes provide a natural cash market hedge of input price risk and reduce the firm's optimal input futures position.     

Production subcontracting and location

Using data from a panel of Spanish manufacturing firms, I examine factors that explain firms' production subcontracting decisions and test whether there is any evidence that production subcontracting is facilitated in areas typically associated with higher agglomeration economies. The results show that location matters. Firms in industry agglomerations are more likely to subcontract production activities. While in general, larger and older firms as well as high wage firms show a greater probability for production subcontracting, industry agglomeration particularly facilitates subcontracting for smaller and lower wage firms and it allows firms to respond to a greater degree to expansive demand conditions by taking advantage of subcontracting.     

Kyle equilibrium under random price pressure

Decisions in Economics and Finance - We study the equilibrium in the model proposed by Kyle (Econometrica 53(6):1315–1335, 1985) and extended to the continuous-time setting by Back (Rev...     

住房价格指数以及区位对住房价格的影响——北京市住房价格实证分析

根据北京市的1308个新建住宅项目数据,建立了Hedonic模型,着重分析了时间、距离、环线以及行政区等变量对住房价格的影响,构建了北京市住房Hedonic价格指数和住房价格的梯度曲线.     

Interest rate, demand and input price uncertainty and the value of firms

In an infinite-horizon inventory model, an increase in interest rate uncertainty increases the value of a firm which has positive value. An increase in input price uncertainty increases the value of the firm. If decisions are made before the realization of demand uncertainty, increased uncertainty about an additive demand shock reduces the value of a price-setting firm with a concave value function, and leaves unchanged or increases the value of a quantity-setting firm. If decisions are made after the realization of demand uncertainty, an increase in the uncertainty of an additive demand shock increases the value of the firm.     

Production and hedging under correlated price and background risks

Decisions in Economics and Finance - This paper examines the competitive firm that has to make its production and hedging decisions under correlated price and background risks. The background risk...     

Preference for equivalent random variables: A price for unbounded utilities

Savage's expected utility theory orders acts by the expectation of the utility function for outcomes over states. Therefore, preference between acts depends only on the utilities for outcomes and the probability distribution of states. When acts have more than finitely many possible outcomes, then utility is bounded in Savage's theory. This paper explores consequences of allowing preferences over acts with unbounded utility. Under certain regularity assumptions about indifference, and in order to respect (uniform) strict dominance between acts, there will be a strict preference between some pairs of acts that have the same distribution of outcomes. Consequently in these cases, preference is not a function of utility and probability alone.     

Discrete choice models and the housing price and travel to work elasticities of location demand

Multinomial logit and nested logit models of mode choice in travel to work and housing location choice are estimated from 1970 U.S. census data aggregated to small zones of the Chicago SMSA. The estimated models are then used to derive the “housing rent,” “travel time,” and “travel cost” elasticities of location demand. The effects of sampling variation, sample size, attribute inclusion, model specification, and estimation method on the estimated elasticities are evaluated and found to be important. The elasticities are also compared and found to agree with those obtained from other discrete choice models and, in the case of “housing rent,” with estimates obtained from models based on other theoretical structure.     

Nursing input into the purchase decision reveals costs not included in the price tag

Working collaboratively with the institution's nurses not only will provide a more comprehensive view of products being considered for purchase but will also uncover the costs of bringing in a product that are not specified on the price tag.     

Spatial price competition in the Manhattan hotel market: The role of location,quality, and online reputation

We investigate whether and to what extent price competition among hotels in Manhattan is driven by geographic location, quality, and online reputation. We investigate (a) which of the three product differentiation dimensions matters most for hotels' pricing decisions and (b) whether and to what extent competition is localized. Results show that hotel quality and geographic location matter the most for price competition. Whereas hotels of similar reputation also react to each other's prices, the effect is less important. Also, results indicate that hotels' prices react most aggressively to prices set by the four nearest hotels in the area.     

The determinants of homebuilder stock price exposure to lumber: Production cost versus housing demand

We study the economic linkage between homebuilder stock market performance and commodity futures market information on a major component of building materials—lumber. The price of lumber plays a dual role in determining homebuilder profits: it represents a production input cost and serves as a future housing demand indicator. Using all US publicly listed homebuilder stocks, we show that the housing demand effect dominates the builder–lumber relationship. This effect is robust even after we control for the Federal Housing Finance Association (FHFA) housing price index (HPI). Our results further indicate that the slope of the lumber futures curve serves as a cross-market signal of future housing demand and thus of homebuilder stock market performance.     

Differencing of random walks and near random walks

The traditional rationale for differencing time series data is to attain stationarity. For a nearly non-stationary first-order autoregressive process—AR (1) with positive slope parameter near unity—we were led to a complementary rationale. If one suspects near non-stationarity of the AR (1) process, if the sample size is ‘small’ or ‘moderate’, and if good one-step-ahead prediction performance is the goal, then it is wise to difference the data and treat the differences as observations on a stationary AR (1) process. Estimation by Ordinary Least Squares then appears to be at least as satisfactory as nonlinear least squares. Use of differencing for an already stationary process can be motivated by Bayesian concepts: differencing can be viewed as an easy way to incorporate non-diffuse prior judgement—that the process is nearly non-stationary—into one's analysis. Random walks and near random walks are often encountered in economics. Unless one's sample size is large, the same statistical analyses apply to either.     

破解土地价格“剪刀差“难题——以重点城市的居住地价和工业地价为例

“剪刀差”概念源于20世纪20年代前苏联的超额税，是对不合理的工农业产品价格的概括，其实质是工农业产品的不等价交换。随着我国城市化和工业化的不断推进，地价“剪刀差”这一现象开始在我国土地市场领域中出现，而且这种差异呈现不断拉大的趋势。然而，学者们较多关注的是政府廉价征地和高价出让土地之间的地价“剪刀差”现象，对不同用途土地价格的‘剪刀差”现象研究得很少。因此，对近几年我国重点城市的居住地价和工业地价的“剪刀差”现象进行一些研究，分析不同用途土地价格‘剪刀差”存在的原因并提出解决方法，很有必要。     

Public input competition and agglomeration

This paper analyzes the impact of public input competition in a New Economic Geography framework. It is shown that regional competition yields an overprovision of public inputs if trade costs are sizable while it leads to underprovision if regions are highly integrated. Moreover, public input competition assures a dispersion of industry as long as trade costs are high but induces agglomeration even for ex ante identical regions if trade costs have fallen below a certain value. Finally, a trade-off between regional convergence and efficiency arises since the efficient distribution of regional infrastructure requires full agglomeration for sufficiently low trade costs.     

Causality and intraurban location

Most intraurban location models in urban economics are based on a a priori assumption that employment is exogenous and a determinant of residential location. In this paper this assumption is relaxed or tested by estimating a dynamic model using pooled cross-sectional time-series data; the results suggest that causality runs from residence to employment, not vice versa.     

Equilibrium price and advertisement distributions

We consider an economy where many sellers sell identical goods to many buyers. Each seller has a unit supply and each buyer has a unit demand. The only possible information flow about prices is through costly advertising. We show that in equilibrium the sellers use mixed strategies in pricing which leads to price and advertisement distributions. With convex advertising costs each seller sends only one advertisement in the market. We also delineate a class of advertising costs which ensures that sellers may send multiple advertisements in equilibrium. Higher prices are advertised more than lower prices.     

Drug innovation and price competition

This study is designed to examine the relationship between drug innovation and price competition. The empirical results presented here support the hypothesis that new drugs-as measured by new chemical entities-exert downward pressure on the prices of existing competitors within the same therapeutic class. The implication of this finding for public policy is that drug innovation not only provides new therapy but also stimulates price competition.     

Productivity and energy price differentials

In taking account of the interrelationship between energy and other primary resources, labour and capital, this paper presents a methodology for quantifying regional efficiency differentials using Taylor series approximations to profit functions representing regional economies. The resulting formulation makes it possible to decompose labour productivity into its contributing factors which now include energy price differentials in addition to such traditional variables as differentials involving capital-employee ratios and the quality of labour. This approach is applied to Canadian regional data from 1962 to 1978. On average, between 5.2% and 9.2% of Canadian regional productivity differentials can be attributed to regional energy price differentials.