THE ROLE OF INVENTORIES AND SPECULATIVE TRADING IN THE GLOBAL MARKET FOR CRUDE OIL

We develop a structural model of the global market for crude oil that for the first time explicitly allows for shocks to the speculative demand for oil as well as shocks to flow demand and flow supply. The speculative component of the real price of oil is identified with the help of data on oil inventories. Our estimates rule out explanations of the 2003–2008 oil price surge based on unexpectedly diminishing oil supplies and based on speculative trading. Instead, this surge was caused by unexpected increases in world oil consumption driven by the global business cycle. There is evidence, however, that speculative demand shifts played an important role during earlier oil price shock episodes including 1979, 1986 and 1990. Our analysis implies that additional regulation of oil markets would not have prevented the 2003–2008 oil price surge. We also show that, even after accounting for the role of inventories in smoothing oil consumption, our estimate of the short‐run price elasticity of oil demand is much higher than traditional estimates from dynamic models that do not account for for the endogeneity of the price of oil. Copyright © 2013 John Wiley & Sons, Ltd.     

DEMAND,CUSTOMER BASE‐LINE AND DEMAND RESPONSE IN THE ELECTRICITY MARKET: A SURVEY

The increasing use of demand‐side management, as a tool to reliably meet electricity demands at peak time, has stimulated interest among researchers, consumers and producer organiza‐tions, managers, regulators and policymakers. This research reviews the growing literature on models which are used to study demand, customer base‐line (CBL) and demand response in the electricity market. After characterizing the general demand models, the CBL, based on which the demand response models are studied, is reviewed. Given the experience gained from the review and existing conditions, the study combines an appropriate model for each case for a possible application to the electricity market; moreover, it discusses the implications of the results. In the literature, these aspects are studied independently. The main contribution of this survey is attributed to the treatment of the three issues as sequentially interdependent. The review is expected to enhance the understanding of the demand, CBL and demand response in the electricity market and their relationships. The objective is conducted through a combination of demand and supply side managements in order to reduce demand through different demand response programs during peak times. This enables electricity suppliers to save costly electricity generation and at the same time reduce energy vulnerability.     

HOW TO BEST ENSURE REMUNERATION FOR CREATORS IN THE MARKET FOR MUSIC? COPYRIGHT AND ITS ALTERNATIVES

Abstract.  The focus of this essay is to examine the market for copyrighted works with a particular emphasis on the sound recording market. This market is currently in a state of flux, some would say disarray, due to the ability of the Internet to lower transmission costs for both authorized and unauthorized copies, with the latter being, at this time, far more prevalent. In this essay we discuss the intent of copyright, the role of copying and file-sharing, and some alternative production/consumption schemes meant to strengthen or to replace copyright.     

THE ROLE OF TIME‐VARYING PRICE ELASTICITIES IN ACCOUNTING FOR VOLATILITY CHANGES IN THE CRUDE OIL MARKET

There has been a systematic increase in the volatility of the real price of crude oil since 1986, followed by a decline in the volatility of oil production since the early 1990s. We explore reasons for this evolution. We show that a likely explanation of this empirical fact is that both the short‐run price elasticities of oil demand and of oil supply have declined considerably since the second half of the 1980s. This implies that small disturbances on either side of the oil market can generate large price responses without large quantity movements, which helps explain the latest run‐up and subsequent collapse in the price of oil. Our analysis suggests that the variability of oil demand and supply shocks actually has decreased in the more recent past, preventing even larger oil price fluctuations than observed in the data. Copyright © 2012 John Wiley & Sons, Ltd.     

SEARCH AND VACANCY COSTS IN THE TOKYO HOUSING MARKET: ATTEMPT TO MEASURE SOCIAL COSTS OF IMPERFECT INFORMATION

The social cost of imperfect information, in terms of buyers' search costs and sellers' opportunity costs of vacancy, is estimated in the real estate market of resale condominiums in central Tokyo by using a new, comprehensive dataset of resale condominium transactions. The results suggest a substantial social cost. Specifically, if housing information were perfectly available and marketing time were null, sellers would get benefits of 22.59% of imputed net rents of their property. In addition, buyers would save 1,042,000 yen spent on search activities for one transaction, if information were perfect. This is equivalent to 13.2% of buyers' average annual income.     

STRATEGY AND STRUCTURAL ADJUSTMENT TO REGAIN FIT AND PERFORMANCE: IN DEFENCE OF CONTINGENCY THEORY

Comparative, contingency approaches to organization structure have been criticized as being inherently static. The present article argues that functionalist theories and quantitative methods can explain structural change. This is exemplified by a diachronic enquiry into strategy and structure. Several propositions about organizational dynamics relating diversification, reorganization and performance are supported. However, the notion of contingency adjustment to structure to attain match as a frequent alternative to structural adjustment to contingencies is not borne out. Neither of the two prevailing theories of structural change, ‘contingency determinism’nor ‘strategic choice’, is completely adequate and a third formulation is advanced: that of ‘structural adjustment to regain fit’. While structural-functional enquiry into organizations using comparative quantitative methods has yielded information about structural statics, the contribution to knowledge of dynamics seems more problematic. This article seeks to record that structural-functionalism does inform the analysis of organizational change and to show that quantitative contingency approaches can illuminate change if the theory used in the analysis is formalized properly. This involves the partial abandonment of both of the main prevailing theories of structural change: contingency determinism and strategic choice. In their place this article offers as a potentially more fruitful model the structural adaptation to regain fit formulation. Within this the role of performance is shown to be important. The advantage of this framework is demonstrated empirically by means of an examination of the relationship between strategy and structure.     

DURATION DEPENDENCE VERSUS UNOBSERVED HETEROGENEITY IN TREATMENT EFFECTS: SWEDISH LABOR MARKET TRAINING AND THE TRANSITION RATE TO EMPLOYMENT

The effect of a treatment on the hazard rate of a duration outcome may depend on the elapsed time since treatment. In addition, treatment effects may be heterogeneous across agents. The former gives rise to duration dependence of the treatment effect, whereas unobserved heterogeneity gives rise to spurious duration dependence of the observable hazard rate. We develop a model allowing for duration dependence and unobserved heterogeneity in the treatment effect. The model incorporates a Timing of Events model and allows for selectivity on unobservables. We prove identification, exploiting variation in the timing of treatment and outcome. In the application we analyze the effects of the Swedish vocational employment training program on the individual transition rate from unemployment to work. We demonstrate the appropriateness of the approach by studying the enrollment process. The data cover the population and include multiple unemployment spells for many individuals. The results indicate a large, significantly positive effect on exit to work shortly after exiting the program. The effect at the individual level diminishes after some weeks. When taking account of the time spent in the program, the effect on the mean unemployment duration is small. Copyright © 2012 John Wiley & Sons, Ltd.     

MARKET INDUCED AND GOVERNMENT MANDATED ENERGY CONSERVATION IN THE HOUSING MARKET: Econometric Evidence from the U.S.

This paper integrates and compares me results of two large-scale econometric analyses of the effects of residential energy prices upon the U.S. housing market. A simple model of energy consumption in the housing market is developed, and the results of these studies are compared with the common model. The two studies, using very different bodies of data and very different econometric techniques, yield very similar implications in terms of household expenditures and patterns of consumption. In particular, both studies confirm the importance of "natural conservation" in the housing market. Higher energy prices lead to substantially lower consumption of residential energy, even in the absence of regulation. In particular, it is estimated that a doubling of energy prices leads to a reduction of residential energy consumption of about twenty-five percent.     

CONTRACTS,ENTREPRENEURS, MARKET CREATION AND JUDGEMENT: THE CONTEMPORARY MAINSTREAM THEORY OF THE FIRM IN PERSPECTIVE

This survey gives an overview of the theory of the firm as it is formulated within the contemporary ‘mainstream’ of economics. Two groupings of theories are briefly discussed: principal–agent and incomplete contract models. Next, three of the most recent contributions regarding firms are considered. The reference point approach is looked at first followed by a discussion of Spulber's book The Theory of the Firm. Last, we consider the entrepreneurial judgement perspective.     

RAPID GROWTH IN CHINA AND THE ASIAN ECONOMIES: SOME STYLISED FREE‐MARKET POLICY INFERENCES

The focus of this article is on the rapid growth of the Chinese economy and its ongoing interaction with the rest of Asia. It concludes that rapid growth in both Asia and China has resulted from free‐market‐oriented neoclassical economic policies and principles. Owing to its economy's size, its openness and the briskness of its GDP growth, China has influenced economies across the globe as well as the more proximate regional economy.     

THE RECENT REGULATORY RESPONSE TO CORPORATE ECONOMIC CRIME IN THE UNITED STATES: OBSERVATIONS AND COMMENTS

Corporate economic crime, including accounting and auditing fraud and inappropriate behaviour by directors on the boards of US corporations, has resulted in stockholder financial losses and the loss of confidence in investing in the US stock market. We observe the modern corporation with its absentee ownership and professional management team and discuss its inherent incentives to commit management crime. In spite of financial reporting, audits and the use of boards of directors to represent stockholders, management misbehaviour persists. We conclude that the failure of these potential remedies is due to a lack of independence from management in their execution. We comment on some of the provisions of the Sarbanes–Oxley Act, enacted in 2002, and their potential to mitigate some of these conflict of interest conditions.