Behavioral rules and sequences of macroequilibria

This paper compares the dynamic consequences of several diferent behavioral rules involving price or quantity adjustments in a temporary equilibrium, macroeconomic framework. The central rule studied is the widely practiced, cost mark-up, administered pricing rule. A competitive, quantity adjustment rule based on a target rate of return is also examined. These are contrasted with monopolistic, profit maximizing price and quantity adjusting rules. Although the analysis represents but an initial foray into the territory where the interests of behavioral and macroeconomic theories overlap, the results, which trace stagflation to instabilities in ‘permanent’, full-employment equilibrium, suggest that further work in this direction may improve our understanding of present inflationary phenomena.     

掠夺性定价行为的异化及其竞争策略研究

在网络经济条件下,掠夺性定价行为的主体、掠夺条件、表现形式和实施效果都出现了异化,因此,针对掠夺性定价行为的竞争政策也需作相应调整,从效率与公平两个角度系统考量新经济条件下掠夺性定价行为,而不是简单地加以限制.     

Introducing Nonlinear Pricing into Consumer Choice Theory

Introducing nonlinear pricing into the teaching of consumer choice theory would provide an extension that introduces the student to a ubiquitous phenomenon and would enable the instructor to develop some interesting behavioral results. After distinguishing linear and nonlinear pricing, the authors derive the tariff, the consumer budget equation, and some behavioral implications for various nonlinear pricing policies. They show, among other things, that under some forms of nonlinear pricing, after a price rise people may buy more of a commodity or more of a commodity than would have been bought under linear pricing. They note some complications arising in the treatment of quantity discounts and premia.     

Feasibility of predatory pricing in a capacity-constrained duopoly

Predatory pricing is feasible only if the minimax profit of the prey is strictly smaller than the expected profit in the corresponding Bertrand-Nash equilibrium. We completely characterize the conditions for feasibility of predatory pricing in Kreps and Scheinkman's model of capacity-constrained duopoly. The predator must have a capacity larger than that of the prey, and also larger than the Cournot capacity. Surprisingly, predatory pricing may be infeasible not only if the prey is too large but also if it is too small.     

Economics is not always performative: some limits for performativity

The phenomenon of performativity has recently sparked debates about the status of the economic discourse. This paper aims to discuss the subjectivist idea that if economics ‘performs’ (shapes) social reality, rather than merely reflects it, then every theory can be considered ‘true.’ My main goal is to point out three limits of performativity. First, not all theories can be performative since some do not produce empirical landmarks for agents. Second, social institutions restrict performativity. Third, I emphasize the necessity that a theory to be self-fulfilling. This article is a prelude to a new kind of performative studies based on an original definition: a theory performs the world if it implies a behavioral regularity which leads to a general coordination between agents. That is to say, if it becomes a convention à la David Lewis.     

On novelty and economics: Schumpeter’s paradox

Is novelty as such an intra or extra-economic phenomenon? Must we, necessarily, treat novelty uniquely as something that, from outside of an economic system, has an influence on it and on its evolution? Is it not a paradox to say that something that has no economic meaning is able to explain economic change? If so, is this paradox present in the Schumpeterian view on development? In this paper, we present what will be called the Schumpeter paradox: denoting nominally ‘novelty’ and ‘creator personality’ as its source, and ‘norm change’ as an analytical tool, is insufficient to separate different fields such as development and growth, if previously (and as a necessary condition) one does not develop a theoretical framework that has a natural place for the elements of ‘novelty’ and ‘creator personality’ that can support such a difference. Nobody should pretend that the study of economic development processes is straightforward. There are good grounds for believing that the innovation ‘black box’ will remain partially closed to economic analysis. However, this does not mean that nothing substantial may be said about novelty and economic development. How to tackle with this topic (and so, with the above-mentioned paradox) will require a change of perspective: a heuristic task should be undertaken. The ‘action plan approach’ here proposed would provide a coherent analytical framework to tackle with this kind of paradox.     

Does garbage pricing increase the immoral disposal of household waste?

Some empirical studies have attempted to clarify the mechanism of illegal dumping by examining the degree to which per-bag pricing plays a role. However, previous research on the behaviour of avoiding paying a charge for waste collection has tended to neglect so-called ‘immoral disposal,’ which is less risky than illegal dumping because there is no legal penalty. In this study, we define immoral disposal as the dumping of waste in a manner that is immoral but not illegal. To detect the existence of immoral disposal, we apply a spatial econometric approach, namely an extended panel spatial Durbin model, to identify the actual spillover effect of garbage pricing in neighbouring municipalities on immoral disposal from the total waste. A major finding of this study is that immoral disposal exists in unit-based pricing, two-tiered pricing, and fixed pricing.     

Equilibrium joining probabilities for an M/G/1 queue

We study the customers' Nash equilibrium behavior in a single server observable queue with Poisson arrivals and general service times. Each customer takes a single decision upon arrival: to join or not to join. Furthermore, future regrets are not allowed. The customers are homogenous with respect to their linear waiting cost and the reward associated with service completion. The cost of joining depends on the behavior of the other customers present, which naturally forms a strategic game. We present a recursive algorithm for computing the (possibly mixed) Nash equilibrium strategy. The algorithm's output is queue-dependent joining probabilities. We demonstrate that depending on the service distribution, this equilibrium is not necessarily unique. Also, we show that depending on the service time distribution, either the ‘avoid the crowd’ phenomenon or the ‘follow the crowd’ phenomenon may hold.     

Is ‘new’ behavioral economics ‘mainstream’?

When comparing ‘new’ and ‘old’ behavioral economics (BE), many argue that ‘new’ BE has close ties with what is often called ‘mainstream’ economics. The aim of this paper is to reframe the ‘old’ vs. ‘new’ BE debate and investigate the nature of the relationship between psychologists, behavioral economists, and ‘mainstream’ economists. This will lead us to develop the concept of ‘space of interaction’, building on Galison’s metaphor of ‘trading zones’, to emphasize the role of outsiders, strategic thinking, and negotiation in ‘new’ BE. By discussing some often implicit arguments in an otherwise disconnected literature, we seek to bring new arguments to the discussions through a careful study of those relationships in the history of ‘new’ BE and its more recent developments. Leaving aside the orthodox/heterodox contrast and comparative approaches, we hope to provide a different account of the changes in ‘new’ BE and its relationship with the ‘mainstream’.     

When does tiered wholesale pricing create an incentive to reduce retail prices?

Wholesale ‘ladder pricing’ involves setting the wholesale price retailers face as a nonlinear (generally increasing) function of price chosen by retailers. This form of wholesale pricing occurred recently in UK Telecoms, and the issue became extensively debated in the law courts. A major concern in deciding the merits of the case lay with the question of whether or not the introduction of tiered wholesale pricing created incentives for retailers to actually reduce their prices. This paper examines the incentive for the case where the wholesale tariff is a non-linear continuous differentiable function. It is shown that so long as the tariff is strictly increasing, convex, and positive only for retail prices greater than the maximum retailer marginal cost, then there is indeed an incentive to reduce price, whatever the actual gradient of the tariff schedule.     

The organizational evolution of innovative activity in the US semiconductor industry: Technological specialization and diversification

This article analyzes the organizational evolution of innovative activity in the contemporary high-tech industry. It has been argued that by showing illuminating examples and proposing theoretical explanations, the innovation process has been fragmented and distributed among several organizations. In other words, ‘division of innovative labor’ emerges. However, one of the problems of this argument lies in its lack of systematic empirical analysis. Using the United States Patent and Trademark Office patent database, this article analyzes the organization of innovative activity in the US semiconductor industry. It is shown that ‘technological specialization’ has not occurred in this industry as a whole. In addition, it is also shown that there are two distinct modes of development of technology, namely, ‘specialized development of technology’ and ‘diversified development of technology’, in which the share of the latter has been steadily increasing. These results imply that contrary to the earlier conventional arguments, division of labor is not a common phenomenon in the production of technological knowledge.     

STOCK PRICE VOLATILITY,NEGATIVE AUTOCORRELATION AND THE CONSUMPTION–WEALTH RATIO: THE CASE OF CONSTANT FUNDAMENTALS

Based on infinite horizon models, previous theoretical works show that the empirical stock price movement is not justified by the changes in dividends. The present paper provides a simple overlapping generations model with constant fundamentals in which the stock price displays volatility and negative autocorrelation even without changes in dividend. The horizon of the agents matters. In addition, as in recent empirical works, the aggregate consumption–wealth ratio ‘predicts’ the asset return. Thus, this framework may be useful in understanding different stylized facts in asset pricing. Directions for future research are also discussed.     

What explains long memory in futures price volatility?

Long memory in futures price volatility is a well-documented stylized fact with implications for market efficiency, risk management, forecasting and option pricing bias. The implications of long-memory differ, however, based on whether it is of a ‘fractional’ or of a ‘stochastic’ type. The aims of this article are to determine, in the case of agricultural commodity futures data, which type better describes price volatility and also to evaluate several competing explanations for findings of long memory. The evidence presented here finds little support for three out of four potential explanations, namely, excessive noise in the volatility measure, bias in the long-memory estimator and understated SEs of the long-memory parameter. For the data considered, price volatility appears to be most likely generated by a nonfractional long-memory process such as a stochastic break or stochastic unit root.     

Trade Policy in the Presence of Economies of Scale and Product Variety*

It is well known that laissez faire may not be the ‘first-best’ policy in a closed economy where economies of scale are present. Corden has shown that this conclusion can carry over into an open economy, though under his assumption that imported goods are perfect substitutes for home-produced goods, interference with international trade could not raise real income. We have shown that where there are economies of scale, and imported goods are not identical to the home produced goods, interference with trade could raise real national income, though such a form of intervention would not normally be optimal. Further, it could even be desirable to support home production of more than one ‘variety’. Measurements of ‘costs of protection’ that aggregate several varieties into one may mislead not only regarding the size of the cost but even regarding its sign.     

行为公设与资产定价理论

资产定价理论的核心是行为公设,行为公设是对人的行为的公理化概括,资产定价理论是行为公设在资产选择问题上的具体应用。资产定价理论的正确性在现实中经受检验,当资产定价理论被现实证明存在缺陷时,最终必然追溯到行为公设上。资产定价理论与行为公设之间存在着因果和反馈关系,行为公设为因,资产定价理论为果,同时资产定价理论对行为公设作出反馈。要消除资产定价理论对实际结果的偏离,最终必然落实到行为公设上,因此必须加强对行为公设的研究。     

Project evaluation by potential tax reform

Shadow prices are derived for small open economies with several production sectors experiencing constant returns to scale. Small projects affect the balance of trade, domestic prices (of non-traded goods and factors), and sector scales. Only domestic prices affect welfare, and only if there is not ‘domestic price equalization’. Generally, a project's net benefits depend upon the potential tax (and tariff) reform made possible (or necessary) through the balance of trade effect. Border prices are right for traded goods, but domestic good shadow pricing requires knowing the direction of at least one reversible available tax reform, and presuming optimality with respect to available reforms.     

Uncoupled Aspiration Adaptation Dynamics Into the Core

Dynamics for play of transferable‐utility cooperative games are proposed that require information regarding own payoff experiences and other players’ past actions, but not regarding other players’ payoffs. The proposed dynamics provide an evolutionary interpretation of the proto‐dynamic ‘blocking argument’ (Edgeworth, 1881) based on the behavioral principles of ‘aspiration adaptation’ (Sauermann and Selten, 1962) instead of best response. If the game has a non‐empty core, the dynamics are absorbed into the core in finite time with probability one. If the core is empty, the dynamics cycle infinitely through all coalitions.     

The First and Second Stage Pass‐through of Exchange Rates: A Developing Country Perspective

This paper investigates the validity of the conventional wisdom that, unlike in developed countries, exchange rate pass‐through (ERPT) should be ‘complete’ for developing economies. To test this hypothesis, we construct new variables as well as original data sets, which are not readily available in the literature, and employ an alternative error correction model technique for a typical small open developing economy—Bangladesh. The transmission of exchange rate movements to import prices is found to be ‘complete’; however, the ‘second stage pass‐through’ is ‘partial’ both in the short and long run. The response of traded goods prices to exchange rate shocks is found to be significant and larger in the long run compared with the short run. Trade liberalization is also a significant phenomenon for ERPT. The analysis has wider applicability to other small open economies.     

Estimation of an implied price elasticity of demand through current pricing practices

Researchers have long pursued better methods to estimate price elasticity of market-level demand. Due to a plethora of empirical problems, the estimates produced in many empirical studies leave researchers with wide confidence intervals that do little to clarify demand conditions. As a result, these estimates are of limited practical use to the firm facing a firm-level demand. Here, a non-statistical methodology based on seller optimization behaviour is applied that creates an ‘implied elasticity’ of firm-level demand that is robust, intuitively plausible and free of oppressive data requirements. These elasticities are tested in an applied setting against pricing managers’ surveyed estimates for customer price sensitivity for freight rail transportation services and it is found that the estimate is consistent with their pricing behaviour. This methodology is recommended for creating a simple, plausible starting point estimate for firm-level price elasticities, or using this calculation as an input to statistical studies.