inventories and upstream gasoline price dynamics abstract this paper sheds new light on the asymmetric dynamics in upstream u s gasoline prices the model is based on pindyck s inventory model of commodity price dynamics we show that asymmetry in gasoline price dynamics is caused by changes in the net marginal convenience yield higher costs of marketing and storage lead to rising gasoline prices whereas a drop in these costs lowers gasoline prices the former effect is stronger this indicates asymmetric dynamics we also analyze the asymmetry across the sample by analyzing recursive and rolling regressions

matching with waiting times the german entry level labor market for lawyers abstract we study the allocation of german lawyers to regional courts for legal trainee ships because of excess demand in some regions lawyers often have to wait before being allocated the currently used berlin mechanism is not weakly pareto efficient does not eliminate justified envy and does not respect improvements we introduce a mechanism based on the matching with contracts literature using waiting time as the contractual term the resulting mechanism is strategy proof weakly pareto efficient eliminates justified envy and respects improvements we extend our proposed mechanism to allow for a more flexible allocation of positions over time

taxation in matching markets what is the impact of taxation in matching markets in matching markets because agents have heterogeneous preferences over potential partners welfare depends on which agents are matched to each other in equilibrium taxes in matching markets can generate inefficiency by changing who is matched to whom even if the number of workers at each firm is unaffected for markets in which workers refuse to match without a positive wage higher taxes decrease match efficiency however in more balanced matching markets where transfers may flow in either direction such as the student college market lowering taxes may decrease match efficiency because an agent can transfer enough to buy an inefficient partner only to be bought back when taxes are lowered further simulations show that in matching markets traditional deadweight loss estimates based on the change in taxable income can be substantially biased in either direction jel classification h20 j24 c78 d13

walrasian equilibrium with gross substitutes in this paper we study the problem of efficient production and allocation of indivisible objects among a set of consumers we assume that the agents preferences depend on the bundle of objects and the quantity of money they consume furthermore we assume that preferences are quasilinear in money and that agents have a large endowment of money with indivisibilities it is well known that many familiar properties of the utility functions fail to ensure existence in their striking analysis of the matching problem kelso and crawford 5 introduce the gross substitutes gs condition which ensures the non emptiness of the core we propose two new conditions and show that with quasilinearity they are equivalent article id jeth 1999 2531 available online at http www idealibrary com on

market structure and market outcomes in deregulated rail freight markets abstract using cross section data on a national sample of city pair markets for rail freight i examine correlations between prices quantities and the number of single line and interline firms serving markets i estimate the reduced form of a structural model in which rail rates and quantities depend on the number of firms i find that rates increase as the number of firms serving the market falls and quantities shipped rise as the number of firms falls the result is consistent with market power for rail freight shippers that causes markups to rise when fewer firms serve the market and is not consistent with other explanations of the relationship between number of firms and rates and quantities interline shipment is much more costly than single line suggesting that mergers may be desirable even if they exacerbate market power problems

intermediation and resale in networks i study intermediation via sequential bilateral bargaining in markets with a network structure a partition of the network into layers captures intermediation power competition governs trade withi

stochastic convenience yield and the pricing of oil contingent claims this paper develops and empirically tests a two factor model for pricing financial and real assets contingent on the price of oil the factors are the spot price of oil and the instantaneous convenience yield the parameters of the model are estimated using weekly oil futures contract prices from january 1984 to november 1988 and the model s performance is assessed out of sample by valuing futures contracts over the period november 1988 to may 1989 finally the model is applied to determine the present values of one barrel of oil deliverable in one to ten years time

risk premium in the uk natural gas forward market this report investigates the uk natural gas market and tests whether it is a fair game efficient forward market using forward contracts ranging from one to five months time to delivery the forward and spot price series are separately non stationary but cointegrated furthermore the forward prices are biased predictors of both the future spot and the 1 month ahead forward price the risk premium on the forward prices is positive as opposed to the us gas market where the risk premium was found to be negative in similar work moreover the analysis reveals that the storage model is an incomplete model for the relationship between the spot and forward prices however storage has a clear effect on this relationship an effect that appears to be non linear

substitutes and stability for matching with contracts we consider the matching problem with contracts of hatfield and milgrom 2005 and we introduce new concepts of bilateral and unilateral substitutes we show that bilateral substitutes is a sucient condition for the existence of a stable allocation in this framework however the set of stable allocations does not form a lattice under this condition and there does not necessarily exist a doctor optimal stable allocation under a slightly stronger condition unilateral substitutes the set of stable allocations still does not necessarily form a lattice with respect to doctors preferences but there does exist a doctor optimal stable allocation and other key results such as incentive compatibility and the rural hospitals theorem are recovered

on the correspondence of contracts to salaries in many to many matching abstract in this note i extend the work of echenique 2012 to show that a model of many to many matching with contracts may be embedded into a model of many to many matching with wage bargaining whenever 1 all agents preferences are substitutable and 2 the matching with contracts model is unitary in the sense that every contractual relationship between a given firm worker pair is specified in a single contract conversely i show that unitarity is essentially necessary for the embedding result

a graphical exposition of the economic theory of regulation i introduction historically many if not most economic theories have advanced in three fairly distinct stages progressing from descriptive to graphical to mathematical formulations generally in that sequence the economic theory of regulation however has been an exception to this normal order of progression the fundamental corpus of this theory was laid out initially in the descriptive discussions provided by stigler 1971 posner 1974 and others from these early presentations however the theory was subsequently formalized mathematically by peltzman 1976 and becker 1983 without passing through the graphical stage of its development 1 regardless of the chronological order of the progression of this theory however we believe that a fully developed graphical exposition is likely to be of considerable value even now at least two considerations support this view specifically by making this theory more accessible to a wider audience and by better illustrating the basic underlying mechanics behind it the likelihood of significant future advancement we believe is enhanced indeed currently there remain a number of observed regulatory phenomena that have yet to be satisfactorily explained by the existing theory e g the deregulation movement and the specific pattern of observed cross subsidies 2 an improved understanding of the fundamental components of the theory should facilitate its further advancement and lead to an expanded ability to explain a broader range of regulatory practices we illustrate this point through a variety of applications to provide an improved understanding of inter alia the markets likely to be chosen for regulation the propensity of regulatory benefits to be spread across interest groups the symbiotic nature of regulation and cross subsidization and the economics of deregulation we also are able to depict graphically the relationship between the economic theory of regulation and the traditional normative model of regulation which assumes that regulators maximize social welfare the article is organized as follows in section ii we briefly describe the regulator s general optimization problem viz what precisely is being maximized and what constraints apply to that maximization problem the latter topic the constraints will be of primary interest here section iii presents the formal graphical analysis of these constraints by deriving what we label the regulator s benefits budget constraint as its name suggests the benefits budget constraint defines the locus of maximum benefits the regulator is able to deliver to the affected interest groups importantly that constraint is determined by the prior unregulated market equilibrium price and output and by general market parameters such as demand elasticity costs and so on section iv describes the resulting regulatory equilibrium section v then applies the graphical tools developed in sections ii iv to explain a number of commonly observed regulatory phenomena here both the ability to provide new insights and the pedagogical value of the graphical approach are illustrated finally section vi concludes ii the regulator s general optimization problem the economic theory of regulation postulates that regulators will attempt to maximize some objective function most generally the regulator s utility by implementing regulatory policies that benefit and by necessity harm particular interest groups 3 the benefits provided to these groups are then used to purchase from them the objects that are directly valued by the regulator that is the direct arguments contained in the regulator s objective function the distribution of these benefits and harms across the affected groups which is determined by the regulator s choice of a particular regulatory policy is selected to maximize the value of the regulator s objective function the ability of any specific interest group to curry regulatory favor then will depend on the capacity of that group to deliver the objects of value to the regulator in exchange for the benefits provided by the regulatory process

asymmetric price responses market integration and market power a study of the u s natural gas market we studied the market performance at selected representative natural gas trading hubs in the u s and documented different price behaviors among various hubs with nymex prices as the competitive benchmark we found empirically that the spot price responses at some trading hubs were systematically asymmetric thus demonstrating a market advantage by either buyers or sellers we further found that the presence of market power was a very plausible explanation for this price behavior at some hubs

market specific effects of rail deregulation since partial deregulation of the railroad industry in 1980 real rail rates have fallen yet previous studies are inconclusive in identifying deregulation as the reason for lower rates in this paper the author develops a model that tests a variety of deregulation effects on the rates charged for transporting thirty four different commodities the results suggest that deregulation has significantly affected almost all commodities and that the effects vary by commodity and through time initially deregulation increased rates for some commodities had no effect on others and decreased rates on still others however by 1988 deregulation lowered rates significantly for almost all commodities copyright 1994 by blackwell publishing ltd

the role of networks in antitrust investigations antitrust investigations typically focus on the competitive pressures coming from within the defined markets of interest however competitive pressures can also come from other markets even when individually these markets place only weak constraints on one another collectively they may matter a networks approach to modelling competition permits a systemic view of competition that can sometimes paint a more accurate picture we demonstrate this through some simple examples and show more generally how tools from the networks literature can be applied to capture competition across a system of interrelated markets as a leading example we consider antitrust investigations into supermarkets where local geographic markets have been used as the basis of investigation

a double track adjustment process for discrete markets with substitutes and complements we propose a new walrasian tatonnement process called a double track procedure for efficiently allocating multiple heterogeneous indivisible items in two distinct sets to many buyers who view items in the same set as substitutes but items across the two sets as complements in each round of the process a walrasian auctioneer first announces the current prices for all items buyers respond by reporting their demands at these prices and then the auctioneer adjusts simultaneously the prices of items in one set upward but those of items in the other set downward it is shown that this procedure converges globally to a walrasian equilibrium in finitely many rounds

matching with contracts comment the theory of two sided matching markets has interested researchers for its theoretical appeal and its relevance to the design of real world institutions the medical residency matching mecha nism in the united states the national resident matching program nrmp and student assign ment systems in new york city and boston are important mechanisms designed by economists using the theory 1 hatfield and paul r milgrom 2005 present a unified framework of matching with contracts which includes the two sided matching and package auction models as well as a simplified version of a labor market model of alexander kelso and vincent p crawford 1982 as special cases they introduce the substitutes condition of contracts which is an adaptation of the substitutability condition in the matching literature roth and marilda a oliveira sotomayor 1990 to matching with contracts they show that there exists a stable allocation if contracts are substitutes for hospitals and that a number of other results in matching generalize to problems with contracts they further claim that the substitutes condition on individual hospitals prefer ences is necessary to guarantee the existence of a stable allocation for all possible singleton preferences of others that is if contracts are not substitutes for a hospital then there exists a preference profile of other hospitals with single job openings and doctors such that there exists no stable allocation we show that this last claim of hatfield and milgrom 2005 does not hold in general the counterexample we present involves a hospital which has two different kinds of positions and the preferences of the hospital are a combination of preferences of these two positions while the substitutes condition does not hold for that hospital we adopt a technique developed by bettina klaus and flip klijn 2005 and show that there exists a stable allocation we then present the weak substitutes condition which we show is necessary to guarantee existence of stable allocations the modified result we present as well as the original contribu tion of hatfield and milgrom 2005 suggest a connection between the substitutes condition and stability 2

convenience yield without the convenience a spatial temporal interpretation of storage under backwardation a mathematical programming model of the wheat marketing system of western australia manifests a typical pattern of regionwide stocks held at a negative intertemporal spread measured at the port no stocks are held at a monetary loss in terms of local prices any apparent loss is an illusion from spatial aggregation of stocks and attribution of incentives at one locality to storers at all locations moreover as the premium for immediate delivery at the port rises stocks increase at relatively inaccessible inconvenient locations where prices are low allowing more to be shipped from locations more convenient to the port

european natural gas seasonal effects on futures hedging abstract this paper is the first to discuss the design of futures hedging strategies in european natural gas markets nbp ttf and zeebrugge a common feature of energy prices is that conditional mean and volatility are driven by seasonal trends due to weather demand and storage level seasonalities this paper follows and extends the ederington and salas 2008 framework and considers seasonalities in mean and volatility when minimum variance hedge ratios are computed our results show that hedging effectiveness is much higher when the seasonal pattern in spot price changes is approximated with lagged values of the basis futures price minus spot price this fact remains true for short a week and long one three and six months hedging periods furthermore volatility of weekly price changes also has a seasonal pattern and is higher in winter than in summer a simple volatility seasonal model that is based on sinusoidal functions on the basis improves the risk reduction obtained by strategies in which hedging ratios are estimated with linear regressions seasonal hedging strategies linear regression based strategies or even a naive position perform better than more sophisticated statistical methods

a theory of buyer seller networks this paper introduces a new model of exchange networks rather than markets of buyers and sellers it begins with the empirically motivated premise that a buyer and seller must have a relationship a link to exchange goods networks buyers sellers and the pattern of links connecting them are common exchange environments this paper develops a methodology to study network structures and explains why agents may form networks in a model that captures characteristics of a variety of industries the paper shows that buyers and sellers acting strategically in their own self interests can form the network structures that maximize overall welfare

integration of physical and futures prices in the us natural gas market this paper examines the integration between the prices of different types of physical upstream end use and futures contracts of natural gas in the us for the period of june 1990 dec 2014 to examine the equilibrium relationship between physical and futures prices several cointegration tests are applied the study finds that a futures prices are cointegrated with wellhead power industrial and citygate prices b ng1 futures prices granger cause all physical prices c upstream physical prices granger cause futures prices d shocks to wellhead prices are the only ones among physical prices with persistent long term effects e shocks to futures prices have persistent effects on all physical prices f futures contracts with a longer time to maturity explain a larger portion of commercial gas price variations and g commercial and residential prices show different behavior compared to other physical prices in multiple tests

bertrand competition with subcontracting we investigate how the possibility of subsequently subcontracting production to each other influences rivals initial competition for a contract or a market as a two stage game in its first stage the two firms engage in price competition to supply a contract or a market in the second stage the firms may subcontract production to each other it is supposed that the firms produce the identical product with the same strictly convex cost function the incentive for subcontracting comesfrom the strictly convex production costs a firm is obliged to supply the entire quantity demanded at its quoted price our analysis discloses that if the winner of the game s first stage determines the terms of the subcontract in its second stage there exists a unique subgame perfect nash equilibrium spne in pure strategies in which the firms bid the same price in the first stage and both receive zero profits on the other hand if the loser of the game s first stage sets the terms of the subcontract in the second stage there exists a unique spne in pure strategies in which the firms bid the same price in the first stage and both receive positive profits the presence of the possibility of subcontracting supports a unique spne in pure strategies even though no actual subcontracting may occur the spne price is below the socially optimal price in the first case and is above it in the second case we also consider other modes of sharing the gains from subcontracting between the two firms such as the nash bargaining solution

information disclosure as a matching mechanism theory and evidence from a field experiment market outcomes depend on the quality of information available to its participants we measure the effect of information disclosure on market outcomes using a large scale field experiment that randomly discloses quality information in wholesale automobile auctions we argue that buyers in this market are horizontally differentiated across cars that are vertically ranked by quality this implies that information disclosure helps match heterogeneous buyers to cars of varying quality causing both good and bad news to increase competition and revenues the data confirm these hypotheses these findings have implications for the design of other markets including e commerce procurement auctions and labor markets jel c93 d44 d82 l15

stability and competitive equilibrium in trading networks we introduce a model in which agents in a network can trade via bilateral contracts we find that when continuous transfers are allowed and utilities are quasi linear the full substitutability of preferences is sufficient to guarantee the existence of stable outcomes for any underlying network structure furthermore the set of stable outcomes is essentially equivalent to the set of competitive equilibria and all stable outcomes are in the core and are efficient by contrast for any domain of preferences strictly larger than that of full substitutability the existence of stable outcomes and competitive equilibria cannot be guaranteed

measuring the multilateral allocation of rents wyoming low sulfur coal this article develops a general econometric procedure for determining the amount of rent captured by buyers and sellers of goods produced under any market structure we use this technique to measure the rents earned by firms involved in the extraction transportation and consumption of low sulfur wyoming coal statistical results indicate that railroads and coal producers each capture about 23 of potential rent while the state and purchasing utilities capture 7 and 47 respectively further statistical tests support the hypothesis that rents have shifted towards the railroads since their deregulation in 1980 we also examine the extent of discriminatory pricing by relating the percentage markups of price over estimated marginal cost to the demand elasticity for coal we find evidence of price discrimination by coal producers and railroads but the degree of price discrimination exercised by coal producers declines with more recent contracts

sequential procurement with subcontracting two symmetric sellers are approached sequentially by fragmented buyers each buyer conducts a second price auction and purchases from the seller who offers the lower price winning an auction affects bidding for future contracts because the sellers have nonconstant marginal costs we assume that the sellers are completely informed and we study the unique equilibrium that survives iterated elimination of weakly dominated strategies if subcontracting between the sellers is impossible the final allocation of contracts is generally inefficient if postauction subcontracting is possible the sellers can be worse off ex ante than when subcontracting is impossible

in pursuit of monopoly power recent quantitative work in industrial economics this paper reviews empirical work in industrial organization devoted to the question of inferring the existence of monopoly power from data on observed market outcomes like profits and prices the discussion covers inter industry work long conventional in the area newer developments in intra industry analysis and case studies and concludes with some remarks on a small but growing body of work assessing market dynamics the wide range of studies reviewed all generally reveal that market power exists in many industries

convenience yield in commodity price modeling a regime switching approach this paper attempts to model the futures term structures of crude oil and natural gas using the notion of convenience yield in a regime switching framework unlike the existing studies which assume the convenience yield to have either a constant value or to have a stochastic behavior with mean reversion to one equilibrium level the model of this paper extends the gibson and schwartz 1990 model to allow for regime switching in the convenience yield along with the other parameters a closed form solution for the futures price is derived and the model parameters are estimated using the maximum likelihood method the results show that the estimated regimes are very close to the contango and backwardation regimes commonly seen in futures markets the results also show that the transitional probabilities play an important role in shaping the futures term structure implied by the model

cost pass through and inverse demand curvature in vertical relationships with upstream and downstream competition this paper provides two characterizations of the retailer s markup relative to the manufacturer s markup in vertical relationships with homogeneous manufacturers and homogeneous retailers we first show that retailer s relative markup is equal to the ratio of the retail pass through to the wholesale pass through multiplied by the number of manufacturers relative to the number of retailers we then provide its expression in terms of the inverse demand curvature

uncertainty and the convenience yield in crude oil price backwardations abstract this study examines why firms hold stocks of crude oil particularly during price backwardations when spot prices exceed prices for forward delivery using a stochastic control model this paper shows that the equilibrium value of inventories contains the conventional hotelling principle the convenience yield from the classical theory of storage and an option value related to price uncertainty our empirical results suggest that a convenience yield and risk premium are important elements of crude oil price backwardations

commodity convenience yield and risk premium determination the case of the u s natural gas market this paper contributes to the understanding of commodity pricing issues by measuring and modeling two of the most important concepts in the storable commodity markets the convenience yield and risk premium an emphasis is placed on the empirical determination of these factors in the u s natural gas market we find that the convenience yield and risk premium are measurable and economically significant while we find that the determination of the convenience yield is largely consistent with economic theories the evidence regarding the determination of the risk premium is mixed

theories of regulation and the deregulation movement we started this paper with what seemed a paradox no sooner had the various special interest theories of regulation achieved a degree of acceptance than regulatory reforms were instituted in many industries consistent with the public interest on the face of it this appeared to give reason to doubt the validity of the special interest theories

coal rates and revenue adequacy in a quasi regulated rail industry this article considers whether equitable rates to captive coal shippers are compatible with competitive rates of return in the rail industry using the results of a translog cost function based on panel data of class i railroads for 1974 1986 i show that returns to scale are sufficiently large to cause coal rates to rise to socially unacceptable levels if coal shippers have to bear the entire revenue burden moreover even if noncoal traffic makes a contribution to overhead the revenue burden on coal traffic is still substantial and would require increases in coal rates that are probably neither politically nor economically feasible

railroad deregulation pricing reforms shipper responses and the effects on labor the staggers rail act of 1980 relaxed restrictions on pricing and eased abandonment procedures in the railroad industry although the act made virtually no reference to labor its impact on labor has been dramatic the long term contraction of industry employment accelerated quite sharply after 1980 wages increased until 1985 then declined substantially the authors whose empirical analysis uses data on aggregate rail employment for the years 1963 90 current population survey data for 1973 88 and evidence from collective bargaining agreements for 1971 90 argue that pricing adjustments under the staggers act led to changes in shipper behavior which in turn allowed for large declines in the derived demand for rail labor despite increasing output and the observed pattern of wage change followed from the realization of the act s eventual effects on employment

real option valuation of free destination in long term liquefied natural gas supplies this paper presents a real option model for the valuation of destination flexibility in long term lng supplies stochastic price dynamics in the different markets is modelled through geometric brownian motion processes mean reversion is considered as well as correlation between markets but instead of the usual correlation in return shocks a price convergence term is introduced representing the arbitrage streams between markets model parameters are estimated from market data on lng prices by maximum log likelihood the goodness of the fit for the proposed model is tested as well as for two alternative models confidence intervals for the parameters are given results for the model are calculated by monte carlo simulation frequency distributions for the main results are plotted the effect of the main parameters of the model is studied i e price volatilities price convergence initial prices in the markets mean reversion extra transportation costs number of alternative markets the value of destination flexibility is found to be an important share of the value of lng

a multi factor model with time varying and seasonal risk premiums for the natural gas market abstract in this paper we develop a quantitative model of the us natural gas market that explores its multi factor structure and its time varying and seasonal risk premiums with weekly spot and futures prices we show that three factors are preferred to describe the futures term structure and the time varying risk premiums are also significant moreover we found that the market implies a seasonal risk premium with two peaks and troughs in one year which is important to correctly price the futures by maturity month finally we link this seasonal risk premium to the uncertainty of the us natural gas demand and find a positive relationship between them these results reveal the complex aspect of the market and may have useful applications for other commodity sectors

the english auction with differentiated commodities abstract we study economies with indivisibilities that satisfy the gross substitutes gs condition we define an excess demand set with the property that increasing the prices of all goods in excess demand eventually leads to the smallest walrasian prices this procedure is a generalization of the auction studied by g demange d gale and m j sotomayor polit econ 94 1986 863 872 in our auction truthful revelation of demand is a perfect bayesian equilibrium if the smallest walrasian prices correspond to the vickrey clarke groves payments however no dynamic auction can reveal sufficient information to implement the vickrey mechanism if all gs preferences are allowed journal of economic literature classification numbers d4 d44 d5 d51

equalizing discrimination and cartel pricing in transport rate regulation there are two possible outcomes of transport regulation 1 maintaining a carrier cartel and 2 imposing equalizing discrimination against advantaged and in favor of disadvantaged shippers both functions have required a complex rate structure to enforce the respective forms of price discrimination using a sample of freight bills from motor carriers and railroads this paper demonstrates that the principal result of motor carrier regulation has been to maintain a cartel of truckers while railroad regulation has thwarted the wishes of the railroad cartel by imposing equalizing discrimination on weak and strong shippers motor carrier rates respond in an economically rational manner to costs and shipper bargaining power rail rates are either unresponsive or perversely responsive to the same factors deregulation should have divergent effects in the two industries

competitive equilibria in two sided matching markets with general utility functions we present an exact characterization of utilities in competitive equilibria of two sided matching markets in which the utility of each agent depends on the choice of partner and the terms of the partnership potentially including monetary transfer examples of such markets include sellers and buyers or jobs and workers demange and gale showed that the set of competitive equilibria in this type of market forms a complete lattice with each extreme point of the lattice representing an equilibrium with the highest utilities for the agents on one side and the lowest utilities for the agents on the opposite side our characterization is based on establishing a connection between the competitive equilibria of a market and the competitive equilibria of certain strict subsets of that market each obtained by removing exactly one agent this characterization captures the effect of competition when agents are added to the market or removed from the market it gives a precise procedure for constructing competitive eq

tick size price grids and market performance stable matches as a model of market dynamics and equilibrium abstract the tick size in a financial market is the minimum allowable difference between ask and bid prices by the rules of each exchange no transactions can occur within the tick interval the impact of tick size is an ongoing controversy which we study by experimental methods whose simplicity helps distinguish among competing models of complex real world securities markets we observe patterns predicted by a matching cooperative game model because a price grid interferes with a competitive equilibrium and restrictions on order flow interfere with information aggregation the matching model provides predictions when the competitive model cannot although their predictions are the same when a competitive equilibrium does exist our experiments examine stable allocations average prices timing of order flow information flow and price dynamics larger tick size invites more speculation which in turn increases liquidity however increased speculation leads to inefficient trades that otherwise would not have occurred

specifying a structural matching game of trading networks with transferable utility structural estimation of matching games with transferable utility including matching games of trading networks and many to many matching is increasingly popular in empirical work i explore several modeling decisions that need to be made when specifying a structural model for a matching game one decision is the choice of a game theoretic solution concept to impose in the structural model i discuss pairwise stability competitive equilibrium and noncooperative games such as auctions another decision is whether to work with a continuum of agents or a finite number of agents i explore other issues as well

the stochastic seasonal behavior of energy commodity convenience yields abstract this paper contributes to the commodity pricing literature by consistently modeling the convenience yield with its empirically observed properties specifically in this paper we show how a four factor model for the stochastic behavior of commodity prices with two long and short term factors and two additional seasonal factors may accommodate some of the most important empirically observed characteristics of commodity convenience yields such as the mean reversion and stochastic seasonality based on this evidence a theoretical model is presented and estimated to characterize the commodity convenience yield dynamics that are consistent with previous findings we also show that commodity price seasonality is better estimated through convenience yields than through futures prices

a theory of commodity price fluctuations this paper studies the price fluctuations of storable commodities that are traded in open markets and are subject to random shocks to demand or more particularly to supply it relaxes the common assumption that the shocks are identically and independently distributed in favor of temporally dependent and periodic disturbances the existence of a unique stationary rational expectations equilibrium is demonstrated for each of the models analyzed and testable implications of the models are derived an illustrative empirical investigation is then undertaken for the model with periodic disturbances using monthly time series observations for seven commodities over the period 1960 93

matching with contracts we develop a model of matching with contracts which incorporates as special cases the college admissions problem the kelso crawford labor market matching model and ascending package auctions we introduce a new law of aggregate demand for the case of discrete heterogeneous workers and show that when workers are substitutes this law is satisfied by profit maximizing firms when workers are substitutes and the law is satisfied truthful reporting is a dominant strategy for workers in a worker offering auction matching algorithm we also parameterize a large class of preferences satisfying the two conditions

competitive equilibrium in an exchange economy with indivisibilities abstract we analyze an exchange economy in which i all commodities except money are indivisible ii agents preferences can be described by a reservation value for each bundle of indivisible objects and iii all agents are price takers we obtain a necessary and sufficient condition under which market clearing prices exist implications for market mechanisms are discussed journal of economic literatureclassification numbers d51 c78

understanding preferences demand types and the existence of equilibrium with indivisibilities we propose new techniques for understanding agents valuations our classification into demand types incorporates existing definitions substitutes complements strong substitutes etc and permits new ones our unimodularity theorem generalises previous results about when competitive equilibrium exists for any set of agents whose valuations are all of a demand type for indivisible goods contrary to popular belief equilibrium is guaranteed for more classes of purely complements than of purely substitutes preferences our intersection count theorem checks equilibrium existence for combinations of agents with specific valuations by counting the intersection points of geometric objects applications include matching and coalition formation and the product mix auction introduced by the bank of england in response to the financial crisis

does the european natural gas market pass the competitive benchmark of the theory of storage indirect tests for three major trading points this paper presents the first comparative analysis of the relationship between natural gas storage utilization and price patterns at three major european trading points using two indirect tests developed by fama and french 1987 1988 that are applied in other commodity markets we impose the no arbitrage condition to model the efficiency of the natural gas market the results reveal that while operators of european storage facilities realize seasonal arbitrage profits substantial arbitrage potentials remain we suggest that the indirect approach is well suited to provide market insights for periods with limited data we find that overall market performance differs substantially from the competitive benchmark of the theory of storage

the relationship between spot and futures prices in the nord pool electricity market abstract we analyze 11 years of historical spot and futures prices from the hydro dominated nord pool electricity market we find that futures prices tend to be higher than spot prices the average convenience yield is therefore negative but varies by season and depends on the storage levels in hydro reservoirs the average realized return on holding a long position in the futures market is also negative the negative convenience yield and risk premium contrast empirical findings in most other commodity markets we argue that differences between the supply and demand sides in terms of risk preferences and the ability to take advantage of short term price variations can contribute to explain the observed relationship between spot and futures prices in addition our analysis shows that the relationship between spot and futures prices is clearly linked to the physical state of the system such as hydro inflow reservoir levels and demand

credible group stability in many to many matching problems abstract it is known that in two sided many to many matching problems pairwise stable matchings may not be immune to group deviations unlike in many to one matching problems blair 1988 in this paper we show that pairwise stability is equivalent to credible group stability when one side has responsive preferences and the other side has categorywise responsive preferences a credibly group stable matching is immune to any executable group deviations with an appropriate definition of executability under the same preference restriction we also show the equivalence between the set of pairwise stable matchings and the set of matchings generated by coalition proof nash equilibria of an appropriately defined strategic form game

evaluating the risk premium in the u s a natural gas market evidence from low price regime abstractin recent years the u s a natural gas market has seen enormous changes the expectations of abundant supply of shale gas and the slow u s a economic recovery have pushed gas prices below us 4 mmbtu although shale gas is a new promising source of unconventional energy investors face uncertain investment plans in this study we investigate the risk premium by comparing behaviour before and after the change point in agents risk perception unlike traditional empirical research on risk premium we use the parametric two factor model of schwartz and smith 2000 to evaluate the implied risk premium term structure from futures prices traded on the new york mercantile exchange nymex we compare our findings with other empirical results and find that the change point lies at the beginning of the low price regime when we compare periods before and after the change point we observe that the risk premium changed not only in sign but also in magnitude

incentivizing resilience in financial networks when banks extend loans to each other they generate a negative externality in the form of systemic risk they create a network of interbank exposures by which they expose other banks to potential insolvency cascades in this paper we show how a regulator can use information about the financial network to devise a transaction specific tax based on a network centrality measure that captures systemic importance since different transactions have different impact on creating systemic risk they are taxed differently we call this tax a systemic risk tax srt we use an equilibrium concept inspired by the matching markets literature to show analytically that this srt induces a unique equilibrium matching of lenders and borrowers that is systemic risk efficient i e it minimizes systemic risk given a certain transaction volume on the other hand we show that without this srt multiple equilibrium matchings exist which are generally inefficient this allows the regulator to effectively stimulate a rewiring of the equilibrium interbank network so as to make it more resilient to insolvency cascades without sacrificing transaction volume moreover we show that a standard financial transaction tax e g a tobin like tax has no impact on reshaping the equilibrium financial network because it taxes all transactions indiscriminately a tobin like tax is indeed shown to have a limited effect on reducing systemic risk while it decreases transaction volume

understanding price controls and nonprice competition with matching theory we develop a quality competition model to understand how price controls affect market outcomes in buyer seller markets with discrete goods of varying quality while competitive equilibria do not necessarily exist in such markets when price controls are imposed we show that stable outcomes do exist and characterize the set of stable outcomes in the presence of price restrictions in particular we show that price controls induce non price competition price floors induce the trade of inefficiently high quality goods while price ceilings induce the trade of inefficiently low quality goods

price controls non price quality competition and the nonexistence of competitive equilibrium we investigate how price ceilings and floors affect outcomes in continuous time double auction markets with discrete goods and multiple qualities when price controls exist the existence of competitive equilibria is no longer guaranteed hence we investigate the nature of non price competition and how markets might evolve in its presence we develop a quality competition model based on matching theory equilibria of the quality competition model always exist in such price constrained markets moreover they naturally correspond to competitive equilibria when competitive equilibria exist additionally we characterize the set of equilibria of the quality competition model in the presence of price restrictions in a series of experiments we find that market outcomes closely conform to the predictions of the model in particular price controls induce non price competition between agents both in theory and in the experimental environment market behaviors result in allocations close to the predictions of the model

equilibria and indivisibilities gross substitutes and complements this paper examines an exchange economy with heterogeneous indivisible objects that can be substitutable or complementary we show that a competitive equilibrium exists in such economies provided that all the objects can be partitioned into two groups and from the viewpoint of each agent objects in the same group are substitutes and objects across the two groups are complements this condition generalizes the well known kelso crawford gross substitutes condition and is called gross substitutes and complements we also provide practical and typical examples from which substitutes and complements are both jointly observed

the inefficiency of regulating a competitive industry productivity gains in trucking following reform this study confirms the higher productivity levels predicted by advocates of regulatory reform in trucking and shows that these gains have been substantial cost simulations suggest that following a year of higher expenditures efforts to remain competitive have yielded considerable cost savings that increase over time from 1 percent in 1981 to 23 percent in 1984 the indirect effects of reform through the independent variables initially decrease costs but later lead to higher costs the cumulative effect has been a less than 1 percent increase in costs in 1980 becoming by 1984 a significant 16 percent productivity gain copyright 1990 by mit press

connecting the cooperative and competitive structures of the multiple partners assignment game multiple partners assignment game is the name used by sotomayor the multiple partners game in m majumdar ed equilibrium and dynamics essays in honor of david gale the macmillan press ltd new york 1992 the lattice structure of the set of stable outcomes of the multiple partners assignment game int j game theory 28 1999 567 583 to describe the cooperative structure of the many to many matching market with additively separable utilities stability concept is proved to be different from the core concept an economic structure is proposed where the concept of competitive equilibrium payoff is introduced in connection to the equilibrium concept from standard microeconomic theory the paper examines how this equilibrium concept compares with the cooperative equilibrium concept properties of interest to the cooperative and competitive markets are derived

compensation unionization and deregulation in the motor carrier industry abstract previous research on the deregulation of the motor carrier industry has concluded that firms have become more efficient under deregulation and that costs have fallen largely at the expense of labor most studies that examine the effects on labor use current population survey data and find that wage premiums to union labor have fallen as a result of deregulation this study uses firm data and finds that deregulation had a very small effect on the average compensation paid by surviving union firms for nonunion firms the impact of deregulation is much larger these results suggest that the compensation premium for the labor of surviving union firms has increased but this increase applies only to surviving union labor in the paper we also point to and note a major exodus of union firms with the result that union labor levels have fallen and fallen dramatically