DEMAND UNCERTAINTY AND RESALE PRICE MAINTENANCE

When retailers must commit to shipment quantities prior to resolution of demand uncertainty, manufacturer stipulation of a minimum retail price is likely to be profitable for the manufacturer and not damaging to the retailers. The reason is simple: if demand turns out to be low, the unfettered market-clearing price can lie below the price that maximizes total sales revenue. A minimum retail price that is binding in the low-demand state can thus increase total revenue even though it saddles retailers with unsold merchandise. The ubiquity of full reimbursement for returns in Japan, even though it is in theory merely a second-best way of achieving minimum retail price stipulations, reveals important aspects of manufacturer maintenance of retail prices having to do with enforcement problems, the allocation of risk-bearing, and economic incentives. These aspects of resale price maintenance (RPM) are relevant to the normative evaluation of the special exemptions for RPM that Japan's Fair Trade Commission has long maintained but is now phasing out.     

PRICE DYNAMICS WITH CUSTOMER MARKETS

Using microdata from a U.S. retailer we document that customer turnover responds to pricing. We study the optimal price setting of a firm when its demand has an extensive margin that is elastic to price due to customers' opportunity to search for an alternative supplier. The price pass‐through of idiosyncratic productivity shocks is incomplete, with the most productive firms passing through more. Firm demand is more persistent than price. Higher demand is associated with lower markups due to higher search intensity, despite flexible prices. We find empirical support for these predictions in microdata from the retail industry.     

Demand disruption and coordination of supply chain via effort and revenue sharing

This article explores the equilibrium behaviour of a basic supplier–retailer distribution channel under demand disruption via effort and revenue sharing contract. This differs from the traditional supply chain coordination model. Firstly, demand is simultaneously affected by retail price and nonprice marketing effort from manufacturers and retailers. Secondly, when the demand is disrupted, this article considers disruptions in the market scale and price sensitivity coefficient. Thirdly, the supply chain coordination model is proposed via effort and revenue sharing contract. In this way, the manufacturer reduces the wholesale price as an incentive for the retailer to share revenue. Finally, the total supply chain profit is greater with contract than no contract. This also constitutes another incentive for the players to follow the effort and revenue sharing contract.     

DUALITY WITH SECTOR‐SPECIFIC EXTERNALITIES UNDER SOCIAL CONSTANT RETURNS*

We develop dual approaches to quantity and price relationships of production in a general multisectoral model with sector‐specific externalities. The production of each good exhibits socially constant returns to scale but privately decreasing returns. We find that the Stolper‐Samuelson theorem holds for factor intensity ranking from the social perspective and that the Rybczynski theorem holds for factor intensity ranking from the private perspective. The price‐output dual fails to hold in general. Moreover, we re‐establish the Heckscher‐Ohlin theorem in the two‐sector case, as well as the factor endowment–factor price and price‐output comparative statics in the high‐dimension case under proper conditions.     

The Performance of Market‐Timing Strategies of Italian Mutual Fund Investors

In this paper, we show that simple buy‐and‐hold strategies over‐perform market‐timing strategies effectively used by Italian investors in equity mutual funds. We estimate returns from market‐timing strategies using aggregate data on net flows for a large sample of equity mutual funds, available to Italian investors, that buy stocks in the following markets: Europe and the euro area, the United States and Emerging markets. In all cases, buy‐and‐hold over‐performs market‐timing with extra returns that go from 0.24 per cent per quarter (Europe and euro area) to 0.87 per cent per quarter (US market). These differences are not explained by differences in risk and risk exposure. Investors should re‐consider their investment strategies and choose cheaper, in terms of fees and simpler, in terms of portfolio allocation, passive strategies.     

THE IMPACT OF OIL PRICE SHOCKS ON THE U.S. STOCK MARKET*

It is shown that the reaction of U.S. real stock returns to an oil price shock differs greatly depending on whether the change in the price of oil is driven by demand or supply shocks in the oil market. The demand and supply shocks driving the global crude oil market jointly account for 22% of the long‐run variation in U.S. real stock returns. The responses of industry‐specific U.S. stock returns to demand and supply shocks in the crude oil market are consistent with accounts of the transmission of oil price shocks that emphasize the reduction in domestic final demand.     

Buyer power and quality improvements

This paper analyses the sources of buyer power and the effect of buyer power on sellers’ investment in quality improvements. In our model, retailers make take-it-or-leave-it offers to a producer and each of them in equilibrium obtains its marginal contribution to total profits (gross of sunk costs). In turn, the individual marginal contribution depends on the rivalry between retailers in the bargaining process. Rivalry increases when retailers are less differentiated and when decreasing returns to scale in production are larger. The allocation of total surplus affects the incentives of the producer to invest in product quality, an instance of the hold-up problem. An increase in buyer power not only makes the supplier and consumers worse off, but it may even harm retailers that obtain a larger share of a smaller surplus.     

The Behaviour of Banking Stocks During the Financial Crisis and Recessions. Evidence from Changes‐in‐Changes Panel Data Estimations

This paper examines the impact of the financial crisis and economic recessions on bank shares compared to the overall stock market index for 18 OECD countries from 1993 to 2015. The empirical methodology utilizes the changes‐in‐changes approach. We compare and contrast the returns of the banking stock price index (treatment group) in each country with their general stock price index (control group), which experiences smaller changes. Our results suggest that bank returns on average perform significantly worse than that of the general stock price index during recessions. In addition, we also find significantly greater volatility in bank share returns.     

Retailers and consumers in sequential auctions of collectibles

Abstract.  We analyse an independent private-value model, where heterogeneous bidders compete for objects sold in sequential second-price auctions. In this heterogeneous game, bidders may have differently distributed valuations, and some have multi-unit demand with decreasing marginal values (retailers); others have a specific single-unit demand (consumers). By examining equilibrium bidding strategies and price sequences, we show that the presence of consumers leads to more aggressive bidding from the retailers on average and heterogeneous bidders is a plausible explanation of the price decline effect. The study of the expected revenue of the seller confirms the interest of auctioneers in inviting different types of bidders.     

Manufacturer's pricing strategy in a two-level supply chain with competing retailers and advertising cost dependent demand

The paper studies a two-echelon supply chain comprising one manufacturer and two competing retailers with advertising cost dependent demand. The manufacturer acts as the Stackelberg leader who specifies wholesale price for each retailer. The two retailers compete with each other in advertising and they have different sales costs. The manufacturer uses one of the following two pricing strategies: (i) setting the same wholesale price for both the retailers irrespective of the difference in their sales costs; (ii) setting different wholesale prices for the retailers depending on their sales costs. Two models are developed. In the first model, the manufacturer shares a fraction of each retailer's advertising cost while in the second model, the manufacturer does not share any retailer's advertising expenses. In both the models, we derive the retailers' and manufacturer's optimal strategies. A numerical example is given to illustrate the theoretical results developed in each model. Computational results show that it is always beneficial for the manufacturer to adopt different wholesale pricing strategy for the retailers.     

The benefits to domestically owned plants from inward direct investment: the role of vertical linkages

Abstract The paper estimates the effects of the U.S. direct investment in Canada upon productivity in domestically owned plants. We distinguish between FDI in the industry of domestically controlled plants and FDI in the industries linked through supply or use of intermediate inputs. We find that an increase in supplier FDI increases productivity growth in domestically controlled plants. The positive productivity effects of FDI are more pronounced for plants that buy more intermediates and who purchase science‐based intermediate inputs (i.e., electronics, machinery and equipment, and chemicals). Productivity of domestic plants also benefits from larger‐scale and higher rates of advanced technologies adoption.     

Modelling the dynamics of European carbon futures price: A Zipf analysis

This article investigates the European carbon futures price dynamics by applying the Zipf analysis. The results show that: first, carbon price behaviour is asymmetric, and the long-term bearish probability is greater than the long-term bullish probability. Second, time-scales of investment and speculators' expectations of returns have dual effects on carbon price behaviour. The longer the time-scales of investment, the higher the bearish probability. The lower the expectations of returns, the smaller the distortion of carbon price behaviour. Third, the differences in carbon market cognitions from non-greedy speculators with different expectations of returns mainly lie in the amplitudes and occasions of carbon price fluctuations, rather than in the carbon price fluctuations themselves. Fourth, speculators' expectations of returns have critical points. Once the critical points are reached, they will no longer be able to distort carbon price behaviour. Finally, we discuss some investment advice for supports of the decision-makers. For non-greedy-type speculators, they will choose to hold negatively in the short term and buy and hold in the long term, while for greedy-type speculators they will sell their European Union Allowances (EUAs) in the short term, and buy and hold in the long term. The results are helpful to hedge against unwanted carbon price movements, and to understand the transactions between different types of agents.     

需求扰动下供应链契约协调机制研究

本文根据需求扰动的影响力大小,将其分为日常需求扰动和突发需求扰动,并对比了两种不同需求扰动的产生原因和特征;具体阐述了需求扰动是如何对供应链上各企业造成影响的,并给出了两种不同的传导模式;通过剖析需求扰动风险传导机制,从3个角度提出了针对需求扰动的控制策略;最后,通过建模探讨了在需求扰动后价格敏感系数改变的情况下零售商对产品价格的调整。同时,为了保证零售商按发生需求扰动后的最优订购量订购产品和按最优产品零售价给产品定价,根据需求扰动不同的影响程度,分类讨论了与供应链相协调的适用契约。     

The NOME law: implications for the French electricity market

In December 2010, France approved the law “Nouvelle Organisation du Marché de l’Electricité” (or NOME law) to promote competition in the retail electricity market. In practice, the law allows retailers to buy nuclear production from the incumbent, at a regulated access price. This mechanism works up to a ceiling of 100 terawatt hours, which represents one quarter of the incumbent’s production from nuclear plants. Each retailer is assigned a share of that amount proportionally to its portfolio of clients. We contribute to the debate raised by the NOME law regarding the evolution of retail market prices. We show that a price decrease results if the ceiling is sufficiently high compared to the market share of the retailers competing with the incumbent. This pro-competitive effect is stronger when the incumbent’s rivals take into account the impact of their market strategy on the redistribution rule. Finally, we find that, if the regulated price of the NOME electricity is set above the nuclear cost, the incumbent realizes a gain that may result in strategic withholding, weakening the pro-competitive effects of the law.     

A model of fashions and status

This paper presents a model of fashion cycles based on the idea that individuals purchase fashion goods because their displayed status increases with the personal status of other consumers who buy the same good. Fashion cycles occur in the model because demand now is a rising function of future prices: if future prices are high, only rich consumers will buy it in the future and the good will have a higher status value in the future and will be more desirable now, even though demand now is a decreasing function of current price. The time inconsistency problem is solved by repeated cycles which allows for reputation building. The crucial assumption made is that there is perfect information about the price path of all firms and the average status of the purchasers of each product. This limits possible profits in fashion markets in competition as imitation of price paths is then possible.     

Asymmetric effects of oil price shocks on stock returns: evidence from a two-stage Markov regime-switching approach

The asymmetric effects of oil price shocks on stock returns have attracted the attention of many researchers in the past several decades. Most of these researchers’ studies, however, do not separate out the sources of oil price shocks when examining the asymmetric effects. In this article, we address this limitation using a two-stage Markov regime-switching approach. Our results indicate that oil supply and demand shocks have a null or minimal impact on stock returns in a low-volatility regime and a statistically significant impact in a high-volatility regime. We observe that oil demand shocks affect stock returns significantly more than oil supply shocks. A positive aggregate demand shock significantly increases stock returns, whereas a positive oil-specific demand shock markedly decreases stock returns. These results have important implications for policymakers and investors.     

PRODUCT FUNCTIONALITY,COMPETITION, AND MULTIPURCHASING

The more functionalities a good offers, the greater is its perceived quality. Equilibrium prices in standard spatial competition models depend solely on quality differences. We assume that new functionalities are more appreciated the closer a product is to a consumer's ideal variety. Prices are then increasing in functionality levels. Furthermore, we endogenize whether consumers buy only one of two varieties (single‐purchase) or both (multipurchase). Under multipurchase, there might be a hump‐shaped relationship between equilibrium prices and functionality levels. Therefore, it could be optimal for each supplier to sacrifice sales and set prices so high that multipurchase is eliminated.     

International Trade,Hedging, and the Demand for Forward Contracts*

One of the main results of the literature on the effects of uncertainty on trade states that uncertainty should not matter in the presence of well‐developed forward markets. Empirical studies, however, do not support this result. We derive the demand for forward cover in a small open economy with terms‐of‐trade uncertainty. Adopting a standard and more realistic decision structure than the one usually used in this literature, we find that risk‐averse agents will not buy forwards at an unbiased price. Agents treat forward contracts as an asset rather than as an insurance. This is the reason why, when calibrating the model, only 17% of imports are covered by forwards.     

A FURTHER EXAMINATION OF THE PRICE AND VOLATILITY IMPACT OF STOCK DIVIDENDS AT EX‐DATES*

We examine the price and volatility reaction around stock dividend ex‐dates for an Australian sample, over the period January 1992 to December 2000. We find that price reaction around stock dividend ex‐dates provides positive abnormal returns both prior, and subsequent, to the abolishment of par value of shares in July 1998. When we partitioned the sample into financial, industrial non‐financial and mining firms, the price reaction is found to be positive and significant only for industrial non‐financial companies. Volatility of daily returns for periods subsequent to ex‐dates is significantly greater than corresponding periods prior to announcement dates, while cumulative raw returns subsequent to ex‐dates are significantly lower than periods prior to announcement dates for industrial non‐financial companies. The magnitude of the price reaction is statistically significantly related to an increase in the volatility of daily returns and to a reduction in cumulative raw returns subsequent to the ex‐dates, for industrial non‐financial companies. These findings support buying pressure hypothesis suggested by Dhatt et al. (1994, 1996 ).     

Permissible delay period and pricing decisions in a two-echelon supply chain

Suppliers often offer trade credits to their capital-constrained retailers to stimulate more sales. The permissible delay period, as a variable factor, influences almost all decisions in a trade credit contract. In this article, we consider a two-echelon supply chain involving a supplier and a capital-constrained retailer in which the demand is the retail price- and time-dependent. We propose a decision model to determine the optimal delay period and pricing decisions under a noncooperative Stackelberg game with the supplier as the leader. We obtain the analytical-form optimal solutions. Our analysis reveals the influence of the delay period on the wholesale and retail prices. Numerical examples further clarify our theoretical results.