asymmetric effects of oil price uncertainty on corporate investment abstract using a comprehensive data set of a large panel of us firms over 1984 2017 we show that the negative effect of crude oil price return uncertainty on investments is asymmetric in particular we show that investment is more significantly reduced following the volatility of positive oil price changes than that of negative changes and this asymmetric effect is more pronounced in small firms in addition we find that the asymmetric effect is stronger in the crude oil and gas producing companies where the effect of the volatility of negative oil price changes is greater than that of positive oil price changes we also find that the impact of positive or negative oil price change uncertainty on investments substantially differs across different industries the results are quite robust to the way in which we measure the investment and oil price uncertainty and to alternative regression methods

price setting supergames with capacity constraints this paper examines the role of industry capacity in enforcing collusion in the context of repeated games for a fixed capacity per firm it is shown that changes in the number of firms have a non monotone effect on the best enforceable cartel price this is due to the fact that while an additional firm lowers the share that each of the other firms enjoys at the collusive price it also increases the losses to each firm should the cartel fail

the effects of oil price uncertainty on global real economic activity this paper investigates the effect of oil price uncertainty on global real economic activity using a quarterly vector autoregressive model with stochastic volatility in mean stochastic volatility allows oil price uncertainty to vary separately from changes in the level of oil prices and allows one to incorporate an extraneous indicator of oil price uncertainty such as realized volatility that greatly improves the precision of the estimated uncertainty series the estimation results show that an oil price uncertainty shock has negative effects on world industrial production all else equal for example it is shown that a doubling of oil price volatility is associated with a cumulative decline as high as 0 3 percentage points in world industrial production

oil price shocks policy uncertainty and stock returns of oil and gas corporations abstract this paper investigates the effects of oil price shocks and economic policy uncertainty on the stock returns of oil and gas companies we find that an oil demand side shock has a positive effect on the return of oil and gas companies on average whereas shocks to policy uncertainty have a negative effect on the return historical decomposition shows that the effects of oil shocks on the stock return are amplified by the endogenous policy uncertainty responses these results are consistent with those for major integrated oil and gas companies the return responses however show heterogeneous effects of structural shocks on upstream midstream and downstream oil and gas companies suggesting that a well diversified portfolio is obtainable

challenges of existing in a market as a small low quality producer this paper explores the strategy of a small firm entering a monopolist s market thereby creating a duopoly market the small firm avoids competing with the larger incumbent firm by producing a lower quality product at a lower price the model here establishes an equilibrium under a specific set of assumptions and examines how exogenous factors affect prices qualities and profits although the strategy might allow the firm to enter and earn a profit the market conditions may make this position much less desirable to that of the large firm for several reasons in the case explored here where tastes for the product are uniformly distributed the small firm s profit is about six percent of that of the larger firm the smaller firm is more severely threatened by the entrance of a third firm furthermore even if the smaller firm can cut costs its position is not well suited for exploiting such increases in efficiencies

allocative disturbances and specific capital in real business cycle theories chanted albeit in varying degree with business cycle theories that either posit unexplained nominal wage and price rigidities or rely on misperceptions about nominal variables as a key driving force one response to this disenchantment has been a concentration of research effort on real business cycle theories aside from dissatisfaction with competitor theories the very visible oil price shock episodes of the 1970 s lent plausibility to the view that exogenous real disturbances cause large fluctuations in aggregate economic activity this essay on real business cycle theory considers the role of allocative disturbances in aggregate economic fluctuations when human and physical capital are specialized by allocative disturbances i mean events that impinge on the economy by inducing a costly time consuming reallocation of specialized resources at least since the publication of ricardo s principles in 1817 economists have recognized some of the potentially important aggregate consequences of allocative disturbances ricardo writes

industrial organization and public policy competition policy has been dominated by politics industrial organization can expect to exert an influence only insofar as it commands superior knowledge that is true with respect to the long run since economies of scale are limited to the short run competition is feasible in the long run therefore a trade off approach seeking to identify optimal market structures is misleading competition policy should instead be directed at prohibiting protective strategies of incumbents to deter entry competition being a process of creative destruction political viability of a competitive order requires competition policy to be supplemented by a social welfare policy

asymmetric effects of oil price changes on the balance of trade evidence from selected african countries the main new contribution of this study was to delve into the asymmetric impacts of changes in oil prices on the trade balance in the framework of six major african economies to tackle this topic carefully we employ three measures of external balances oil non oil and total trade balances and assess the asymmetric response of the external balances of those six economies to oil price changes in the short and long run like most previous studies we first assume the impacts of oil price fluctuations to be symmetric and employ the linear autoregressive distributed lag ardl method to explore the topic we then separate oil price hikes from oil price plunges and implement the non linear ardl method to reveal that the price of crude oil has a vital role to play in the trade balances for those six african economies further there is evidence of significant asymmetric impacts of oil prices typically on the oil trade balance of africa s top oil producing countries for the non oil and total trade balances in contrast there is little evidence of the asymmetry of oil price changes

cartels profits and excess capacity a model of a collusive duopoly in which each firm has limited capacity is studied the negotiated output quotas depend on the bargaining power of the firms which derives from the damage the firms can do by cutting prices for fixed capacities the unit profit of the small firm is at least as large as that of the large firm and the relative position of the small firm is better when demand is low when the capacities can be chosen once and for all there is excess capacity in equilibrium so long as the cost of capacity is not too high copyright 1987 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

oil price shocks and real gdp growth empirical evidence for some oecd countries this study assesses empirically the effects of oil price shocks on the real economic activity of the main industrialized countries multivariate var analysis is carried out using both linear and non linear models the latter category includes three approaches employed in the literature namely the asymmetric scaled and net specifications evidence of a non linear impact of oil prices on real gdp is found in particular oil price increases are found to have an impact on gdp growth of a larger magnitude than that of oil price declines with the latter being statistically insignificant in most cases among oil importing countries oil price increases are found to have a negative impact on economic activity in all cases but japan moreover the effect of oil shocks on gdp growth differs between the two oil exporting countries in the sample with the uk being negatively affected by an oil price increase and norway benefiting from it

oil shocks and external balances abstract we provide estimates of the effects of demand and supply shocks in the global crude oil market on several measures of oil exporters and oil importers external balances including the oil trade balance the non oil trade balance the current account capital gains and changes in net foreign assets nfa first we show that the effect of oil demand and supply shocks on the merchandise trade balance and the current account which depending on the source of the shock can be large depends critically on the response of the non oil trade balance our results provide evidence of an intermediate degree of international financial integration second we document the presence of large and systematic valuation effects in response to these shocks valuation effects overall tend to cushion the effect of oil demand and supply shocks on the nfa positions of oil exporters and oil importers third we quantify the overall importance of global business cycle demand shocks as well as oil market specific demand and supply shocks for external balances

heuristics and heterogeneity in health insurance exchanges evidence from the massachusetts connector although health insurance exchanges are likely to be a growing source of individual coverage little is known about consumer behavior on these exchanges while health insurance exchanges are intended to facilitate competition among insurers and make it easier for consumers to access insurance understanding how consumers choose insurance plans is necessary for the design of these markets we characterize demand on a health insurance exchange including the type of plans individuals choose and how they respond to price previous work has noted the potential limits to consumer decision making ability in similar environments abaluck and gruber 2011 in a structural model of health plan choice we consider the role of heterogeneity in preferences and whether consumers rely on simple rules of thumb we offer a first look at behavior on massachusetts s unsubsidized health insurance exchange the connector 1 which was created

on the dynamic effects of oil price shocks a study using industry level data abstract this paper analyzes the effects of oil price shocks on demand and supply in various industries the impulse responses of identified var models indicate that for industries that have a large cost share of oil such as petroleum refinery and industrial chemicals oil price shocks mainly reduce supply in contrast for many other industries with the automobile industry being a particularly important example oil price shocks mainly reduce demand the paper suggests that oil price shocks influence economic activities beyond that explained by direct input cost effects possibly by delaying purchasing decisions of durable goods

structural change and the macroeconomic effects of oil shocks empirical evidence from the united states and japan abstract this paper investigates whether the usa and japan have become better insulated from oil price disturbances due to more favorable structural conditions new production technologies allowing greater energy substitution the development of energy commodity markets reduced energy intensity of production more market oriented energy policies and so on we decompose the influences of oil shocks on real gnp growth and inflation movements in the context of a simultaneous equation model where identification is partly achieved by restricting the long run dynamics we find that oil shocks accounted for a greatly reduced fraction of real gnp growth and inflation variance in both countries primarily because of superior insulation characteristics rather than reduced importance of oil disturbances our estimates suggest that a similar percentage oil price hike would have exerted about one quarter the contractionary effect on real gnp and upward push in inflation in the 1980s compared with the previous two decades jel e31 e32 f30

the non linear impact of oil price on the oil demand a panel smooth transition regression model was adopted to analyse the non linear impact of oil prices on oil demand data for 42 countries was obtained from the international energy agency for the

pricing access services many established industries such as the online service industry the telecommunication industry or the fitness club industry are access service industries when using services in these industries consumers pay for the privilege of accessing the firm s facilities but do not acquire any right to the facility itself a firm s pricing decisions in access industries frequently come down to a simple choice among flat fee pricing usage pricing or two part tariff pricing however it is not so simple for firms in those industries to make this choice access service firms typically face a mix of consumers who have intrinsically different usage rates a key characteristic of access service firms however is that the cost of providing an additional minute of usage is typically negligible as long as the firm has the necessary capacity to serve its customers service capacity which corresponds to the total available time on a firm s system is often limited in this paper we show that service capacity and consumer usage heterogeneity are two important factors that determine a firm s optimal choice we develop a model that incorporates these two salient characteristics shared by access industries and study what determines a firm s choice among the three alternative pricing structures flat fee pricing usage pricing or two part tariff pricing our analysis shows that in the presence of consumer usage heterogeneity service capacity mediates a firm s optimal choice in a complex yet predictable way a firm s choice also hinges on whether heavy or light users are more valuable in terms of their willingness to pay on a per unit capacity basis the presence of both consumer usage heterogeneity and capacity constraints prompts a firm to choose its pricing structure to attract a desired customer mix and to price discriminate as a result two part tariff pricing is not always optimal in access industries and a firm s pricing structure can vary in a complex way with the interaction of those two factors specifically we show that when light users are more valuable a firm may use a two part tariff or a flat fee depending on whether the firm is constrained by its service capacity but never charge a usage price alone or offer any signing bonus a negative flat fee or a flat payment to customers when heavy users are more valuable a firm may choose to set a usage price a signing bonus plus a usage price or flat fee interestingly regardless of whether heavy or light users are more valuable in an access service industry only flat rate pricing is a sustainable pricing structure once the industry has developed sufficient excess capacity we also show that the optimal pricing strategy in access industries can have some intriguing nonintuitive implications that have not been explored elsewhere for instance when the industry capacity is unevenly distributed between competing firms the large capacity firm may well be advised to increase rather than to decrease its price to accommodate the small firm it would be too costly and too tactless for the large firm to do otherwise in fact the strategy of accommodation calls on the larger firm to retreat in both light and heavy user markets and leave more of its capacity idle and more of the market demand unmet when the small firm s capacity hence the industry capacity increases this implies that incremental policy measures that encourage the growth of smaller companies in the presence of a large company can be welfare decreasing because the growth of smaller firm can force the retreat of a large company at the expense of market coverage today services account for two thirds to three quarters of the gnp not only in the united states but also in many industrial countries access industries are growing rapidly to exert profound impact on today s economy however service pricing in general and pricing access services in particular have not received adequate attention in the literature in this paper we take the first step in understanding how capacity constraints and consumer usage heterogeneity mediate the choice of pricing structures in both monopolistic and competitive contexts

what central bankers need to know about forecasting oil prices central banks routinely use short horizon forecasts of the quarterly price of oil in assessing the global and domestic economic outlook we address a number of econometric issues specific to the construction of quarterly oil price forecasts in the united states and abroad we show that quarterly forecasts of the real price of oil from suitably designed vector autoregressive models estimated on monthly data generate the most accurate real time forecasts overall among a wide range of methods including quarterly averages of forecasts based on monthly oil futures prices no change forecasts and forecasts based on regression models estimated on quarterly data

do oil price shocks matter evidence for some european countries this paper analyzes the oil price macroeconomy relationship by means of analyzing the impact of oil prices on inflation and industrial production indexes for many european countries using quarterly data for the period 1960 1999 first we test for cointegration allowing for structural breaks among the variables second and in order to account for the possible non linear relationships we use different transformation of oil price data the main results suggest that oil prices have permanent effects on inflation and short run but asymmetric effects on production growth rates furthermore significant differences are found among the responses of the countries to these shocks

models of energy use putty putty versus putty clay energy use is inelastic in time series data but elastic in international cross section data two models of energy use reproduce these elasticities a putty putty model with adjustment costs developed by pindyck and rotemberg 1983 and a putty clay model in the pindyck rotemberg model capital and energy are highly complementary in both the short run and the long run in the putty clay model capital and energy are complementary in the short run but substitutable in the long run we highlight the differences in the cross section implications of the models by considering the effect of an energy tax on output in both models in the putty putty model an energy tax that doubles the price of energy leads to a fall in output in the long run of 33 in contrast the same tax in the putty clay model leads to a fall in output of only 5 3

pricing strategies in supergames with capacity constraints some evidence from the u s portland cement industry abstract theory demonstrates that demand variations can have nonmonotonic effects on pricing in supergames with capacity constraints furthermore this nonmonotonic relationship can be a function of capacity utilization rates time series data from 25 regional cement markets are used to examine this results empirically no statistically significant relationship is found between demand variations pricing and excess capacity

to commit or not to commit revisiting quantity vs price competition in a differentiated industry previous studies have shown that quantity commitment by all firms in an industry mitigates price competition this paper shows that when firms have a choice asymmetric outcomes can arise with some firms choosing to commit to a quantity and other firms choosing not to to study the commitment decision we analyze a multistage game within a duopoly of differentiated firms a la hotelling in the first stage of the game firms choose whether or not to commit to a quantity in the second stage each firm that chose to commit sets a quantity which represents an upper bound on how much it can sell to consumers in the third stage both firms set prices strategically regardless of whether or not they committed in the final stage demand is allocated as consumers maximize their utilities firm s that chose not to commit to a quantity in the first stage can fulfill any quantity that consumers demand at the equilibrium prices we find that if product differentiation is sufficiently low both firms choose to co

imperfect competition and the effects of energy price increases on economic activity the authors show that modifying the standard neoclassical growth model by assuming that competition is imperfect makes it easier to explain the size of the declines in output and real wages that follow increases in the price of oil plausibly parameterized models of this type are able to mimic the response of output and real wages in the united states the responses are particularly consistent with a model of implicit collusion where markups depend positively on the ratio of the expected present value of future profits to the current level of output copyright 1996 by ohio state university press

recent advances in oligopoly theory from a game theory perspective abstract this paper surveys the contribution that recent developments in game theory have made to the understanding of oligopoly theory it is argued that conventional models suffer from the problem that there are a number of solution concepts offered with little guidance as to which should be selected and this is related to the static nature of the models employed one important development in game theory has been the analysis of repeated games and when applied to oligopoly theory this suggests that outcomes may be more cooperative than conventional theory suggests related to this is the requirement that firms employ credible threats to punish cheating from cooperative outcomes and the paper examines the extent to which imperfect information may restrict the scope of firms to employ such punishments one way in which firms may seek to make threats credible is through strategic investments for example in production capacity and the paper explores how competition over price or output is integrated with competition over instruments for strategic investment

on the workings of a cartel evidence from the norwegian cement industry using the institutional set up of the norwegian cement industry in particular its sharing rule we are able to identify the workings of a cartel in some detail given data on prices production and exports we are able to identify marginal costs as well as the effectiveness of the cartel we compare our marginal cost estimates which are derived from an equilibrium condition to detailed cost accounting data and find that our estimate of marginal cost is very much in line with the data we then show that the cement cartel has been ineffective in the sense that the sharing rule induces overproduction and exporting below marginal costs in this sense it is consumers not firms that benefi tf rom the sharing rule we find that the ineffectiveness of the cartel is becoming so large that domestic welfare of a merger to monopoly would in fact be positive at around 1968 which is exactly when the merger actually took place however we also show that competition would have resulted in even higher welfare gains over the entire sample

capital as a commitment strategic investment to deter mobility abstract this paper analyzes how an early entrant in a market can exploit its head start by strategic investment the analysis is based on spence s paper investment strategy and growth in a new market bell j econ 10 1979 1 19 we frist study the investment game in the no discounting case which embodies the key features of mobility deterrence we establish the existence of a set of perfect equilibria and suggest that one particular equilibrium is most reasonable this equilibrium also valid with discounting involves the follower firm being forever deterred from investing to its steady state reaction curve in contrast to spence s proposed solution

oil price uncertainty and the u s stock market analysis based on a garch in mean var model abstract this paper uses a bivariate garch in mean var model to examine the effect of oil price uncertainty on the u s real stock returns at the aggregate and sectoral levels estimation results suggest that there is no statistically significant effect of oil price volatility on the u s stock returns the absence of an uncertainty effect might be explained by the fact that companies are likely to hedge against fluctuations in oil prices it could also stem from the ability of most companies to transfer the higher cost of oil to customers moreover the impulse responses indicate that accounting for oil price uncertainty oil price increases and decreases have symmetric effects on the u s aggregate stock returns in that energy price increases and decreases are estimated to have equal and opposite effects on the u s financial market however this symmetric effect doesn t hold across all the sectors studied in this paper

asymmetries in the response of economic activity to oil price increases and decreases abstract it has been common to assume that the relationship between economic activity and oil prices is asymmetric theoretical underpinnings for this asymmetry include costly sectoral reallocation partial equilibrium models of irreversible investment and some version of precautionary savings yet recent studies that use new methodologies to test for asymmetries in u s data have cast some doubts on that premise in this paper we use state of the art techniques to evaluate the presence of asymmetries for a set of oecd countries containing both oil exporters and oil importers we find very little support for the hypothesis that the response of industrial production to oil price increases and decreases is asymmetric our results have important implications for theoretical models of the transmission of oil price shocks they point towards the importance of direct supply and direct demand transmission channels as well as indirect transmission channels that imply a symmetric response

price competition in a capacity constrained duopoly abstract this paper characterizes the set of nash equilibria in a model of price setting duopoly in which each firm has limited capacity and demand is continuous and decreasing in general there is a unique equilibrium so that comparative static exercises are meaningful the properties of the equilibrium conform with a number of stylized facts the equilibrium prices are lower the smaller is demand relative to capacity when demand is in an intermediate range the firms use mixed strategies they randomly hold sales if capacities are chosen simultaneously before prices the set of equilibrium capacities coincides with the set of cournot quantities

collusive pricing with capacity constraints in the presence of demand uncertainty we explore the response of collusive prices to changing demand conditions when firms operate under capacity constraints in the presence of demand uncertainty we find support for the conventional view that periods of low demand lead through the emergence of excess capacity to a breakdown of collusive pricing we also find that the nature of price wars depends on the degree of excess capacity in the industry while small amounts of excess capacity can lead firms to engage in mild price wars characterized by uniform price reductions and market share stability more severe price wars characterized by price undercutting and market share instability can emerge if excess capacity is sufficiently great finally our results lend support to the view that market share instability is a symptom of ineffective collusion

strategic incentives in dynamic duopoly abstract we compare steady states of open loop and locally stable markov perfect equilibria mpe in a general symmetric differential game duopoly model with costs of adjustment strategic incentives at the mpe depend on whether an increase in the state variable of a firm hurts or helps the rival and on whether at the mpe there is intertemporal strategic substitutability or complementarity a full characterization is provided in the linear quadratic case then with price competition and costly production adjustment static strategic complementarity turns into intertemporal strategic substitutability and the mpe steady state outcome is more competitive than static bertrand competition

oil shocks and aggregate macroeconomic behavior the role of monetary policy a recent paper by bernanke gertler and watson 1997 suggests that monetary policy could be used to eliminate any recessionary consequences of an oil price shock this paper challenges this conclusion on two grounds first we question whether the federal reserve actually has the power to implement such a policy for example we consider it unlikely that additional money creation would have succeeded in reducing the fed funds rate by 900 basis points relative to the values seen in 1974 second we point out that the size of the effect that bernanke gertler and watson attribute to oil shocks is substantially smaller than that reported by other researchers primarily due to their choice of a shorter lag length than that used by other researchers we offer evidence in favor of the longer lag length employed by previous research and show that under this specification even the aggressive federal reserve policies proposed would not have succeeded in averting a downturn

the effects of oil price shocks on job reallocation we investigate the effect of oil price innovations on u s manufacturing job flows using a simultaneous equation model that nests symmetric and asymmetric responses we find no evidence of asymmetry in the response of job flows to positive and negative oil price innovations we then inquire whether firms when facing positive shocks shed jobs faster than they create jobs we show that positive innovations lead to a decline in net employment and an increase in job reallocation possibly due to search and matching issues yet the latter effect becomes statistically insignificant when we control for data mining we demonstrate that the cumulative one year effect of oil price shocks on job creation and destruction was smaller during the great moderation but it was larger for gross job reallocation these variations were caused by a change in the transmission channel and not by smaller oil price shocks

a neoclassical model of unemployment and the business cycle this paper investigates a general equilibrium model of unemployment and the business cycle in which specialization of labor plays a key role a rational expectations equilibrium with fully flexible wages and prices can exhibit unemployment in which the marginal product of employed workers exceeds the reservation wage of those who are without jobs workers are unemployed either because they are in the process of relocating for a better job or because they are waiting for conditions in the depressed sector to improve moreover seemingly small disruptions in the supplies of primary commodities such as energy could be the source of fluctuations in aggregate employment and can exert surprisingly large effects on real output

the impact of oil price shocks evidence from the industries of six oecd countries most of the studies about the macroeconomic consequences of oil price shocks have been focused on us aggregate data in contrast to these studies this paper empirically assesses the dynamic effect of oil price shocks on the output of the main manufacturing industries in six oecd countries the pattern of responses to an oil price shock by industrial output is diverse across the four european monetary union emu countries under consideration france germany italy and spain but broadly similar in the uk and the us moreover evidence on cross industry heterogeneity of oil shock effects within the emu countries is also reported

this is what happened to the oil price macroeconomy relationship abstract many of the quarterly oil price increases observed since 1985 are corrections to even bigger oil price decreases the previous quarter when one looks at the net increase in oil prices over the year recent data are consistent with the historical correlation between oil shocks and recessions

judo economics reconsidered capacity limitation entry and collusion abstract the capacity investment by a new firm into an established market is explored in a repeated price game if the entrant expects collusion to prevail upon entry it may not practice judo economics but instead choose to install enough capacity to serve the entire market this occurs when collusion involves optimal punishment paths if instead collusion is based upon the static nash equilibrium punishment and the incumbent has excess capacity and the entrant is at a cost disadvantage the entrant will strategically limit its capacity so as to restrain the incumbent s price response to entry

equilibrium vertical differentiation in a bertrand model with capacity precommitment both quality differentiation and capacity commitment have been shown to relax price competition however their joint influence on the outcome of price competition has not yet been assessed in this article we consider a three stage game in which firms choose quality then commit to capacity and finally compete in price when the cost of quality is negligible we show that firms do not differentiate their products in a subgame perfect equilibrium in other words capacity precommitment completely eliminates the incentive to differentiate by quality

oil price shocks and u s economic activity abstract our understanding of the sources of oil price fluctuations and their effects on the u s economy has undergone important transformations in the last decades first several studies have demonstrated the importance of identifying the causes of oil price fluctuations whether they are driven by demand or supply shocks instead of assuming that oil price changes are exogenous to the evolution of the world s economic activity second new methodologies have allowed researchers to re evaluate the functional form of the relationship between oil prices and u s gdp its components and job flows third significant advances have been made in understanding the relationship between oil price uncertainty news economic policy uncertainty and aggregate economic activity finally investigations into the time varying nature of oil price macroeconomy relationship have provided important insights into the reasons why unexpected increases in oil prices appear to shock less now than in the 1970s this paper reviews the studies that have contributed to these different aspects of the literature

how sensitive are consumer expenditures to retail energy prices abstract there is growing evidence that the primary effect of energy price shocks on the u s economy involves a reduction in consumer spending we quantify the direct effect on real consumption of unanticipated changes in discretionary income shifts in precautionary savings and changes in the operating cost of energy using durables the possibility of asymmetries in the response of real consumption to energy price shocks is also considered we demonstrate that linear models are consistent with the symmetric behavior of real consumption in 1979 when energy prices increased sharply and in 1986 when they fell sharply it is shown that historically energy price shocks have been an important factor in explaining u s real consumption growth but by no means the dominant factor

cartel pricing dynamics in the presence of an antitrust authority cartel pricing is characterized when firms are concerned about creating suspicions that a cartel has formed balancing concerns about maintaining the stability of the cartel with those of avoiding detection the cartel may either i gradually raise price to its steady state level or ii gradually raise price and then have it decline to its steady state level antitrust laws may have a perverse effect as they make cartel stability easier and thus allow for higher cartel prices

asymmetric responses of consumer spending to energy prices a threshold var approach abstract we document asymmetric responses of consumer spending to energy price shocks using a threshold vector autoregressive model estimated with bayesian methods on u s data with high and low real energy inflation regimes positive energy price shocks have a greater negative effect on consumption compared with the increase in consumption that arises from negative energy price shocks for large shocks the cumulative consumption responses are three to five times greater for positive than negative shocks in disaggregated spending data the asymmetric responses are strongest for durable goods consumption but asymmetries are also present in the responses of nondurables and services consumption

new estimates of the security costs of u s oil consumption abstract in recent years the united states has become much more self reliant in producing oil and a newer economics literature suggests that oil demand may be more elastic and u s gdp may be less sensitive to world oil price shocks than was previously estimated these developments suggest somewhat lower security costs may be associated with u s oil consumption this analysis provides updated estimates of the security premiums for u s consumption of imported oil u s consumption of domestically produced oil and the substitution of imported oil for domestically produced oil estimates of the expected security costs of u s oil consumption are provided over the time horizon from 2015 to 2040 while taking into account projected world oil market conditions the probabilities and sizes of world oil supply disruptions the response of world oil prices to those supply disruptions and the response of u s real gdp to those oil price shocks the estimated oil security premiums suggest that u s oil security has become less of a policy concern

price setting merchants in a simple trade model abstract in lieu of a fictitious walrasian auctioneer price determination in a simple two country two good trade model is explicitly modelled as the strategic price setting behavior of merchants the results depend on the order in which countries are visited and whether or not the supply is backward bending theorem 1 establishes sufficient conditions for the walrasian outcome to be the unique subgame perfect nash equilibrium spne theorem 2 shows when the unique spne is non walrasian

holding idle capacity to deter entry in this journal dixit i980 carefully analysed the extent to which an established firm facing a prospective entrant might make an investment in capacity beyond that which is optimal for its pre entry output in his model both the established firm and prospective entrants understand that a quantity setting nash equilibrium would be established in any post entry game dixit showed that spence i977 had studied an imperfect equilibrium that is an equilibrium that depended upon a threat that was not credible to obtain his result that firms might hold excess capacity to deter entry in a perfect equilibrium a firm would not wish to install capacity that would be left idle if entry did not occur dixit s conclusion however depends on his assumption that each firm s marginal revenue is always decreasing in the other s output this is quite a restrictive assumption for example it is never satisfied in the relevant range for economists second favourite demand curve constant elasticity demand the basic point is unchanged if the firms anticipate price competition with differentiated products rather thanquantity competition in any post entry game under quite plausible conditions rational firms facing rational potential entrants may install capacity that will certainly be left idle we are thus able to rehabilitate spence s original proposition in a perfect equilibrium setting

a duration model of irreversible oil investment theory and empirical evidence the aim of this paper is to analyse the implications of the theory of irreversible investment under uncertainty for investment in oil fields on the united kingdom continental shelf ukcs we consider the problem of an operator who owns a licence to develop and extract oil from a field of known capacity an intertemporal optimization model in discrete time is developed to derive decision rules for the timing of the irreversible development investment and for the optimal rate of extraction model simulation is then used to describe the properties of the numerical solutions the predictions of the theory on the determinants of the irreversible investment decision are then examined using statistical duration analysis data on the length of the time period between discovery and development are available for individual fields on the ukcs we measure the duration of the irreversible investment gestation lag for each field and test the model by assessing the significance of the theoretical variables in explaining the significance of such a lag both our theoretical model and our empirical results suggest the importance of a nonlinear interaction of the level of oil prices and the volatility of oil prices in determining the development lag the simulation of our theoretical model shows a nonlinear impact of oil price volatility on the trigger level of oil prices our empirical results suggest that the effect of price volatility is a function of the expected price level with increased price volatility having a positive impact on the duration of investment appraisal when expected prices are low and a negative impact when they are high

dynamic duopoly prices and quantities we study a dynamic model of duopoly in which firms choose both prices and quantities if quantity capacity choices are relatively inflexible firms generally carry excess idle capacity in equilibrium because of this enforcement cost firms are unable to achieve monopoly levels this contrasts with models in which which firms compete in either prices or quantities alone on the other hand if capacities are flexible firms may be able to sustain monopoly behaviour

fixed fee liscensing of innovations and collusion unlike other types of licensing agreements such as those with output restrictions market division clauses or output royalties licensing contracts with only a fixed fee have been perceived as having no anticompetitive consequences this paper illustrates that fixed fee licensing may facilitate collusion by enhancing the licensee s ability to credibly punish deviations from the collusive outcome on the part of the licenser antitrust implications of the result and potential ways of detecting collusion motivated licenses are discussed copyright 1996 by blackwell publishing ltd

an anatomy of cartel contracts we study cartel contracts using data on 18 contract clauses of 109 legal finnish manufacturing cartels one third of the clauses relate to raising profits the others deal with instability through incentive compatibility cartel organization or external threats cartels use three main approaches to raise profits price market allocation and specialization these appear to be substitutes choosing one has implications on how cartels deal with instability simplifying we find that large cartels agree on prices cartels in homogenous goods industries allocate markets and small cartels avoid competition through specialization

oil price uncertainty and u s employment growth abstract this paper studies the effects of oil price changes on u s aggregate and sectoral employment growth in the presence of time varying oil price uncertainty we estimate a bivariate garch in mean var model using u s monthly data of oil prices and employment growth for the period 1974 m2 2018 m11 based on the results we show that an increase in oil prices reduces total employment growth and that in most private sectors but the public sector is largely unaffected the effects on employment growth in various hub sectors are also different furthermore employment growths at both aggregate and disaggregate levels respond asymmetrically to positive and negative oil price shocks which could possibly be attributed to oil price uncertainty this asymmetric impact is more evident when the model is estimated on the entire sample than on the 1970s sample implying that the role of oil price uncertainty in accounting for variations in employment growth can differ over time these findings underline the empirical relevance of oil price uncertainty for the u s labor market dynamics

segment shifts and capacity utilization in the u s automobile industry an important school of thought argues that sectoral shifts may account for a substantial portion of aggregate fluctuations e g david lilien 1982 fischer black 1987 steven davis 1987 events such as the oil shocks of the 1970 s exchange rate fluctuations and shifts in government spending have their direct effect on the composition of economic activity the sectoral shift literature argues that they may affect the level and the dynamics of output and employment as well the typical story is of a slowly functioning labor market after a sectoral shock search behavior matching problems and a time cost of switching sectors slow the reallocation of workers across sectors this focus however misses important elements of the reallocation problem as black 1987 has argued not only sector specific human capital but also complementary physical and managerial engineering organization etc capital must be reallocated or recreated in response to sectoral shocks if jobs are linked to capital then the slow adjustment of labor may be attributable in part to the sluggishness in the adjustment of capital this paper presents an empirical study of the impact of oil shock sectoral shifts within the u s automobile industry from an analytical perspective a sectoral shift is any event that raises desired output and employment in some sectors and lowers them in others for our purposes a sector is a size class of automobiles within the automobile industry we will be able to study two distinct questions first did the oil priceinduced shocks to the composition of demand interact with short run rigidities in supply to limit industry wide capacity utilization we will quantify the extent to which the changing composition of demand was reflected in a lower aggregate output level with obvious consequences for the employment of capital and of labor and for the return to firms knowledge capital our second question concerns the pace of the intermediate run adjustment to sectoral shocks how rapidly could capital and labor be reallocated to new demand conditions such considerations determine the impact of sectoral shocks on employment and capacity utilization dynamics

managerial incentives and collusive behavior abstract i characterize the effects of empirically observed managerial incentives on long run oligopolistic competition when managers have a preference for smooth time paths of profits as revealed by the empirical literature on income smoothing manager led firms can sustain collusive agreements at lower discount factors capped bonus plans and incumbency rents with termination threats make collusion supportable at any discount factor independent of contracts duration when managers have these preferences incentives and demand fluctuates price wars during booms need not occur the most collusive price may then be pro cyclical

competition and collusion with fixed output in many industries output is fixed by exogenous constraints so firms compete by allocating a given stock of supplies between different markets this paper shows that collusion in such industries leads firms to shift output from high margin markets to low margin markets as a result welfare is generally reduced although prices decrease in some markets and increase in others

prices versus policy an analysis of the drivers of the primary fossil fuel mix abstract energy policymakers often attempt to shape their countries energy mix rather than leave it purely to market forces by calibrating and simulating a dynamic stochastic general equilibrium dsge model this paper analyzes the primary fossil fuel mix in the usa and compares it to germany and the uk given the different evolution of the mixes and the different roles played by relative prices and policy in north america and europe it is found that the model explains well the evolution of the primary fossil fuel mix in the usa for the period 1980 2014 suggesting that relative fossil fuel prices generally dominated in determining the mix during this time however this is not the case for germany and the uk for both countries the model performs well only for the period after the market oriented reforms in the 1990s additionally the volatility of private consumption and output for the pre and post reform periods is evaluated for germany and the uk and it is found that the liberalized energy markets brought about a transition from coal to natural gas but with increased macroeconomic volatility

asymmetric oil prices and trade imbalances does the source of the oil shock matter abstract we examine the asymmetric effects of oil supply shocks shocks to global real economic activity and oil specific demand shocks on the oil non oil and overall trade balances of a large sample of oil exporters and oil importers our empirical strategy accounts for endogenous oil prices heterogeneous parameters and error cross section dependence within a panel framework we find that the pattern of asymmetries in the oil price trade balance relationship depends on the source of the shock for both oil exporters and oil importers oil supply expansions are more important than oil supply disruptions we discuss the role that saudi arabia plays in limiting the global effects of oil supply disruptions although increases in global demand deteriorate trade balances for oil importers and improve them for oil exporters decreases in global demand have a similar rather than an opposite effect our results corroborate the existing evidence that oil price increases only generate large global imbalances if they result from demand side shocks and we present new evidence that oil price decreases only benefit oil importers if they result from supply side shocks

how does coal price drive up inflation reexamining the relationship between coal price and general price level in china abstract due to the coal dominated energy structure china is currently facing significant economic uncertainties brought forward by instability of coal price by separating the asymmetric effects that how upward and downward coal price changes pass through to the economy this paper reexamines the relationship between coal price and general price level in china the asymmetric effects are investigated via vector autoregression models granger causality tests and impulse response function analyses using the monthly time series data from jun 98 to sep 14 results show negative coal price change presents more significant impact on inflation than positive one the inflation responses very abruptly to coal price shock in the short run but the impact regresses rapidly along time accumulatively a 1 increase of coal price will push cpi and ppi up by 0 04 and 0 12 while a 1 decrease of coal price will pull them down by 0 08 and 0 17 respectively the linkage among coal price change ppi and cpi is demonstrated as the main transmission channel of price shock the inflationary effect is strong in the initial stage but will be weakened in the later stage since the pass through effect from ppi to cpi is tiny which confirms ppi is more responsive than cpi to coal price change for policy implications how to avoid extreme volatility in general price level is a major concern of recent agendas such as reforming energy market and building green fiscal system

examining models of collusion the market for lysine abstract we compare the experience with collusion in the market for lysine with the predictions of theory the lysine market provides an ideal setting following the confessions of cartel participants in antitrust investigations data availability allows demand and cost functions to be estimated and observed mark ups compared with predictions we find that several integral aspects of collusion in the lysine market are not adequately addressed in the literature the dynamics associated with entry and investment persistent asymmetries between firms the cartel s bargaining problem and the existence of cheating in equilibrium these issues are likely to have much wider applicability beyond the lysine market

boom or gloom examining the dutch disease in two speed economies traditional studies of the dutch disease do not account for productivity spillovers between the booming resource sector and other domestic sectors we put forward a simple theory model that allows for such spillovers we then identify and quantify these spillovers using a bayesian dynamic factor model the model allows for resource movements and spending effects through a large panel of variables while also identifying disturbances to other shocks using australia and norway as representative cases studies we find that a booming resource sector has substantial productivity spillovers on non resource sectors effects that have not been captured in previous analysis

the determination of price and output quotas in a heterogeneous cartel applying a selection criterion that uses both subgame perfection and the nash bargaining solution this paper investigates the relationship between firms cost functions and collusive behavior it is found that the optimal collusive price exceeds the price that the low cost firm would set if it was a monopolist comparative statics reveal that the optimal collusive price is increasing in the low cost firm s unit cost but is decreasing in the high cost firm s unit cost when the cost differential between firms is sufficiently large copyright 1991 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

dynamic price competition with discrete customer choices abstract for many years dynamic pricing has proven to be an effective tool to increase revenue in the airline and other service industries most studies however focused on monopolistic models and ignored the fact that nowadays consumers can easily compare prices on the internet in this paper we develop a game theoretic model to describe real time dynamic price competition between firms that sell substitutable products by assuming the real time inventory levels of all firms are public information we show the existence of nash equilibrium we then discuss how a firm can adapt if it knows only the initial but not the real time inventory levels of its competitors we compare a firm s expected revenue under different information structures through numerical experiments

tacit collusion in the presence of cyclical demand and endogenous capacity levels abstract we analyze tacit collusion in an industry characterized by cyclical demand and long run scale decisions firms face deterministic demand cycles and choose capacity levels prior to competing in prices our focus is on the nature of prices we find that two types of price wars may exist in one collusion can involve periods of mixed strategy price wars in the other consistent with the rotemberg and saloner 1986 definition of price wars we show that collusive prices can also become counter cyclical we also establish pricing patterns with respect to the relative prices in booms and recessions if the marginal cost of capacity is high enough holding current demand constant prices in the boom are generally lower than the prices in the recession this reverses the results of haltiwanger and harrington 1991 in contrast if the marginal cost of capacity is low enough then prices in the boom are generally higher than the prices in the recession for costs in an intermediate range numerical examples are calculated to show specific pricing patterns

oil and the macroeconomy when prices go up and down an extension of hamilton s results in an important paper hamilton 1983 demonstrated a strong correlation between oil price changes and gross national product growth in u s data however his study pertained to a period in which all the large oil price movements were upward and thus it left unanswered the question whether the correlation persists in periods of price decline moreover the price variable he used was somewhat distorted by price controls in the 1970s this note investigates whether hamilton s results continue to hold when the sample is extended to include the recent oil market collapse and the oil price variable is corrected for the effects of price controls particular attention is given to the possibility of asymmetric responses to oil price increases and decreases as suggested in the structural employment literature loungani 1986 davis 1987 hamilton 1988 like hamilton i based my investigation on the gnp equation in sims s 1 980b six variable quarterly vector autoregressive model

consumer choice and cournot behavior in capacity constrained duopoly competition in a two stage model of duopolistic capacity choice and subsequent price competition consumer switching costs can deter some consumers from seeking service at a low price firm that lacks sufficient capacity to serve the entire market in this setting firms residual demand functions are aggregatedfrom thefirm selection decisions of individual consumers based on firms prices and their induced degrees of service reliability if consumers are approximately risk neutral with respect to service reliability then capacity constrained duopoly competition has a unique subgame perfect equilibrium in which firms choose cournot capacities and prices the equilibrium robustness of cournot behavior extends to duopoly markets in which consumer switching costs are induced by subscription pricing