A test of monopoly price dispersion under demand uncertainty

A test of the predictions of Dana’s (2001) model of monopoly price dispersion under demand uncertainty using ticket price data from Major League Baseball shows that ticket price dispersion changes systematically with demand uncertainty, verifying the predictions of the model.     

Derived factor demand under monopoly

Summary. We generalize the formula provided by Maurice and Ferguson (1973) for derived factor demand in a monopoly by extending it to cross-price effects and taking into account other variables which may, within an general-equilibrium framework, affect demand, such as income. Hopefully, both features increase the applicability of this formula in general-equilibrium analyses. Received: April 5, 2000; revised version: June 7, 2001     

SO2 policy and input substitution under spatial monopoly

Following the U.S. Clean Air Act Amendments of 1990, electric utilities dramatically increased their utilization of low-sulfur coal from the Powder River Basin (PRB). Recent studies indicate that railroads hauling PRB coal exercise a substantial degree of market power and that relative price changes in the mining and transportation sectors were contributing factors to the observed pattern of input substitution. This paper asks the related question: To what extent does more stringent SO₂ policy stimulate input substitution from high-sulfur coal to low-sulfur coal when railroads hauling low-sulfur coal exercise spatial monopoly power? The question underpins the effectiveness of incentive-based environmental policies given the essential role of market performance in input, output, and abatement markets in determining the social cost of regulation. Our analysis indicates that environmental regulation leads to negligible input substitution effects when clean and dirty inputs are highly substitutable and the clean input market is mediated by a spatial monopolist.     

An inventory model with variable demand,component cost and selling price for deteriorating items

In this paper, we develop an economic order quantity (EOQ) model for finite production rate and deteriorating items with time dependent increasing demand. The component cost and the selling price are considered at a continuous rate of time. The objective of this model is to maximize the total profit over the finite planning horizon. We also want to find the integral number of orders in the finite planning horizon. A numerical example, graphical representations and sensitivity analysis are given to illustrate the model.     

Second degree price discrimination and natural monopoly

This paper considers the efficiency of a contestable natural monopoly if consumers are heterogeneous and the monopolist can differentiate prices imperfectly. The paper shows that a “no‐distortion‐at‐the‐top” result, which is standard in models with restricted entry, may also appear in a contestable market. Depending on cost and demand structures, first best efficiency can also be a sustainable equilibrium. However, due to the existence of a continuum of equilibria, first best efficiency is not guaranteed. Most notably, even a stable “distortion‐at‐the‐top” result is possible.     

基于垄断的商品住宅市场价格均衡分析

住房市场不同于其他商品市场,其垄断的特性也和其他垄断市场有别.本文通过一个价格均衡的函数模型对均衡情况下的供给和需求进行分析,由此提出在住房市场垄断情况下涉及短期需求变化时价格的相应调整.本文认为,在住房高端市场存在过高需求(住房需求和投资需求)的情况下,住宅均衡价格由需求弹性的高低决定.由此,对我国当前房价高涨及住房保障措施进行阐述和分析.     

OPEC and the monopoly price of world oil

The paper presents a dynamic model of the behavior of OPEC viewed as a monopolist sharing the oil market with a competitive sector. The main conclusion is that the recent increase in the price of oil was a once and for all phenomenon due to the formation of the cartel and that prices should remain approximately constant during the next twenty years.     

Efficient price and capacity choices under uncertain demand: An empirical analysis

Traditional economic analyses of the peak-load problem typically assume an unrealistic degree of regularity in demand during well-defined peak and off-peak periods. This issue is addressed through a comprehensive statistical model that separates demand into its systematic and stochastic components. This model is combined with a traditional economic model and applied to local telephone service, leading to substantive conclusions relevant for managerial decisions as well as further research, among them:

? Neglecting the systematicand stochastic structure of demand may lead to inefficient tariffs. Efficient measured service structures typically price individual callsbelow incremental capacity cost.

? Industry wide capacity decision rules that are exclusively driven by blockage probability targets during narrowly defined time periods may be economically inefficient.

? For telephone service, spot pricing, which sets high prices during periods ofactual congestion, has the potential to be considerably more efficient than traditional tariffs that set high prices during periods ofexpected congestion.

     

Private labels, price rivalry, and public policy

The article examines (i) why low-quality private labels are introduced in some product categories and not in others, (ii) how the existence of a low-quality private label affects the pricing of a competing national brand, and (iii) how consumers’ surplus and welfare are affected by private labels. We find that the potential for private label introduction may—in return for national brand exclusivity in that particular retail store (exclusive dealing)—lead to price concessions from the producer of the national brand. If the national brand producer decides not to offer an exclusivity contract, a private label is introduced. In this case, private label introduction may lead to higher retail prices on national brands, which can be detrimental to consumer welfare as well as total welfare. We argue that our results have important implications for the interpretation of empirical results and the public policy towards national brands     

The analysis of a price war strategy under market demand growth

We use the finite repeated Prisoners' Dilemma game model herein to discuss how firms choose their optimal strategy under a price war with market demand growth. This model has two players: one is an R-type player and the other is a TFT-type player. Each player has two strategies to choose from: a preemption strategy and a “wait” strategy. Our results indicate that: (i) if the probability that the opponent is an R-type (TFT-type) player is high, then the time when the opponent adopts a preemption strategy will be early (late); (ii) Market demand growth is an incentive for cooperation among firms; (iii) if the market demand growth rate is high, then the R-type player will not have an evolutionary advantage. We use the competition between cell phone manufacturing firms Nokia and Motorola in China as an example. When Nokia is an R-type player and adopts a preemption strategy, Motorola should preferably use a preemption strategy rather than a “wait” strategy. However, as a TFT-type player, this will benefit Motorola under the situation of market demand growth.     

Inflation,oil price volatility and monetary policy

In a fully micro-founded New Keynesian framework, we characterize an analytical relationship between average inflation and oil price volatility by solving the rational expectations equilibrium of the model up to second order of accuracy. The model shows that higher oil price volatility induces higher levels of average inflation. We also show that when oil has low substitutability in the production function, the higher the weight the central bank assigns to inflation in the policy rule, the lower the level of average inflation is. The analytical solution further indicates that, for a given level of oil price volatility, average inflation is higher when marginal costs are convex in oil prices, the Phillips Curve is convex, and the degree of relative price dispersion is higher. The evolution of inflation during the 70s and 80s is consistent with the prediction of the model.     

Intertemporal price discrimination and consumer demand

Under a particular class of utility functions, intertemporal price discrimination (IPD) is not feasible. That is, customers cannot be made to pay different prices for a durable good at different points in time. Other factors such as falling costs, and differing discount rates between buyers and sellers have been found to make intertemporal pricing schemes feasible, or even profitable. None of these factors, however, were fundamental demand differences which give rise to static price discriminations. In this paper we argue that IPD is indeed feasible and sometimes profitable, if only we allow for a nondurable good in the utility function. A simple additively separable utility is examined first, which is then extended to a nonseparable utility function which allows richer substitution/complementary relations between the durable and the nondurable goods. This may help us to better understand the similarities between static and intertemporal price discriminations.     

Monetary policy and consumers' demand

This paper puts to scrutiny the way monetary policy propagates its effects and the way it should be conducted, focusing on the behavior of consumers. Specifically, it considers a price elasticity of demand that increases with the level of consumption as is observed in the data. A realistic demand structure has remarkable implications for monetary policy. Three main results stand out. First, it can amplify the real effects of monetary and technology shocks. Second, it can weaken the ability of a simple Taylor rule to stabilize the economy. Third, it can attenuate the trade-off in the stabilization of output and inflation. These findings provide support to the notion of a dual mandate for the central bank. They are based on a novel mechanism of intertemporal substitution, whereby consumers have a weak incentive to smooth out the effects of income fluctuations. The mechanism lends itself to addressing questions of stabilization policy and business cycle analysis.     

Production and price smoothing by inventory adjustment?

The present paper examines the role of inventories for the short run adjustment behavior of firms. A theoretical model of a monopolistic firm carrying inventories that includes costs of adjusting output is examined. The model is tested empirically by using business survey data collected by the IFO-Institute, Munich. It is shown, that if data on individual firms are used and econometric estimation techniques are applied that properly take this into account, the estimates derived are fully compatible with the appealing idea of production smoothing by inventories.