Price Discovery and Risk Transfer in the Crude Oil Futures Market: Some Structural Time Series Evidence

This paper re-examines the Garbade and Silber (1983) model with the objective of finding out if the crude oil futures market performs the functions of price discovery and risk transfer. The model is estimated, using daily data, as a system of two seemingly unrelated time series equations allowing the coefficients to be time-varying. The empirical results reveal that the futures market performs about 60 per cent of the price discovery function, and that the elasticity of supply of arbitrage services is adequately high for the market to perform the risk transfer function.
(J.E.L: G13, C22).     

The dynamics of some duopoly games involving the Market Share and Nichol strategies

The paper analyses the dynamics of some duopoly output games involving the Cournot, Market-Share and Nichol strategies. The model assumes linear price and cost functions and supposes that outputs are adjusted instantaneously at discrete time intervals. For all games considered, equilibrium is either reached after a finite number of moves or a stable approach to equilibrium occurs as t → ∞. In fact, apart from a few uninteresting cases, arising from the oversimplified form of the Market-Share strategy, all equilibrium points lie on specified parts of the firms' Cournot loci.     

A Stochastic Frontier Production Function with Flexible Risk Properties

This paper considers a stochastic frontier production function which has additive, heteroscedastic error structure. The model allows for negative or positive marginal production risks of inputs, as originally proposed by Just and Pope (1978). The technical efficiencies of individual firms in the sample are a function of the levels of the input variables in the stochastic frontier, in addition to the technical inefficiency effects. These are two features of the model which are not exhibited by the commonly used stochastic frontiers with multiplicative error structures.An empirical application is presented using cross-sectional data on Ethiopian peasant farmers. The null hypothesis of no technical inefficiencies of production among these farmers is accepted. Further, the flexible risk models do not fit the data on peasant farmers as well as the traditional stochastic frontier model with multiplicative error structure.     

The product elimination function

Historically, major consideration given to product management has focused on research and development or the introductory stage of the product life cycle. The authors present an empirical study delineating the variables to be considered in the product elimination process. More specifically, the elimination process is evaluated under a situation of poor product performance despite a generally viable market. The basic objectives of the study were: to determine the significant variables in the product elimination process of the Small Appliance Industry; to determine the relative importance of the variables; to examine the interaction among variables. The data obtained through personal structured questionnaire interviews were analyzed and provided a ranking of twenty-six variables relevant to the elimination process. Moreover, the Johnson's Hierarchical Clustering Schemes was applied to determine the interaction among variables. The results indicate that profitability and financial variables are most significant in the elimination decision-process. Second, the primary clusters of importance are concerned with market share, market growth rate, consumer awareness, and competitive action.     

Irrelevance of the soft budget constraint for the shortage phenomenon

Kornai's thesis that shortage results from demand expansions bred by the soft budget constraint, derives from his implicit assumption that price regimes of input and output firms are different. Since any firm is both an input and an output firm, which discards the assumption as logically untenable, excess demand can only turn up because of lower than contracted inputs of labor and management that are not offset by an adequate downward adjustment of earnings. Expansions of demand that appear to be autonomous, are incited by uncertain deliveries of inputs, that is, by inefficiency (of output firms) as well. A by far the largest part of excess demand can be explained by state preferences for fast growth. As planners are more successful in generating investment, and the ensuing consumer, demand than in expanding production, shortage is inevitable regardless of the character of the firms' budget constraints.     

On recalls, layoffs, variable hours, and labor adjustment costs

The paper analyzes the employment policy of a firm that can vary both hours and the level of employment. The analysis differs from previous work in the adjustment cost literature in that the firm is able to change its employment not only through hires, layoffs, and quits, but also by recalls of employees who were previously laid off. Thus, we introduce the possibility of the firm inventorying the labor input. It is shown that this labor inventory potential is necessary if the firm is to ever lay off workers. Further, it is demonstrated that linear rather than strictly convex adjustment costs are then required if the firm is to always recall employees who were previously laid off prior to hiring new workers.