frictionless commerce a comparison of internet and conventional retailers there have been many claims that the internet represents a new nearly frictionless market our research empirically analyzes the characteristics of the internet as a channel for two categories of homogeneous products books and cds using a data set of over 8 500 price observations collected over a period of 15 months we compare pricing behavior at 41 internet and conventional retail outlets we find that prices on the internet are 9 16 lower than prices in conventional outlets depending on whether taxes shipping and shopping costs are included in the price additionally we find that internet retailers price adjustments over time are up to 100 times smaller than conventional retailers price adjustments presumably reflecting lower menu costs in internet channels we also find that levels of price dispersion depend importantly on the measures employed when we compare the prices posted by different internet retailers we find substantial dispersion internet retailer prices differ by an average of 33 for books and 25 for cds however when we weight these prices by proxies for market share we find dispersion is lower in internet channels than in conventional channels reflecting the dominance of certain heavily branded retailers we conclude that while there is lower friction in many dimensions of internet competition branding awareness and trust remain important sources of heterogeneity among internet retailers

the effect of asymmetries on optimal hedge ratios there is widespread evidence that the volatility of stock returns displays an asymmetric response to good and bad news this article considers the impact of asymmetry on time varying hedges for financial futures an asymmetric model that allows forecasts of cash and futures return volatility to respond differently to positive and negative return innovations gives superior in sample hedging performance however the simpler symmetric model is not inferior in a hold out sample a method for evaluating the models in a modern risk management framework is presented highlighting the importance of allowing optimal hedge ratios to be both time varying and asymmetric

episodic nonlinearity and nonstationarity in alberta s power and natural gas markets abstract this paper uses a new method of testing for linear and nonlinear lead lag relationships between time series introduced by brooks and hinich brooks c and hinich m j cross correlations and cross bicorrelations in sterling exchange rates journal of empirical finance 20 1999 385 404 on alberta s natural gas and power markets the test based on the concepts of cross correlation and cross bicorrelation is used after pre whitening of the data to test for the existence of residual nonlinearity as well as the episodic nature of the nonlinearity our evidence points to a relatively rare episodic nonlinearity within and across the two series having important implications for forecasting these series

interactions between oil and financial markets do conditions of financial stress matter abstract this study uses a structural threshold var model to study the nonlinear relationships between oil and financial variables the threshold effect is robust across models having different structural orderings of shocks evidence shows that shocks associated with different financial stress regimes explain the asymmetric responses of the system shocks in the stressed regime usually have larger and longer effects than shocks in the normal regime the inverse relationship between real interest rate and real oil price is conditioned on a number of factors and is not robust across all manner of circumstances the relationship between oil price and the us dollar is shock dependent a negative shock that depreciates the dollar may trigger an increase in oil price yet a positive oil shock may lead to appreciation of the dollar finally oil s ability to hedge against rising risk is limited to a market with normal stress conditions it is the us dollar that generally serves as a safe haven when financial markets are enmeshed in considerable tension

the simple analytics of optimal growth with illegal migrants this paper analyses the impact of illegal migration on the optimal path of domestic resident consumption the analysis draws two important conclusions first if illegal migrants and domestic labour are perfect substitutes illegal migration necessarily lowers the long run per capita consumption of domestic residents second if illegal migrants and domestic labour are imperfect substitutes the effect on the long run per capita domestic consumption is ambiguous however in the cobb douglas case the result is clear cut and per capita domestic consumption rises as a result of illegal migration

the stability of price dispersion under seller and consumer learning in many markets it is possible to find rival sellers charging different prices for the same good earlier research has attempted to explain this phenomenon by demonstrating the existence of dispersed price equilibria when consumers must make use of costly search to discover prices we ask whether such equilibria can be learned when sellers adjust prices adaptively in response to current market conditions with consumer behavior fixed convergence to a dispersed price equilibrium is possible in some cases however once consumer learning is introduced the monopoly outcome first found by diamond journal of economic theory3 1971 156 68 is the only stable equilibrium

a theory of tolerance abstract we propose a theory of tolerance where endogenous lifestyles and exogenous traits are invested with symbolic value by people value systems chosen by parents for their children affect the esteem enjoyed by individuals in society intolerant individuals attach all symbolic value to a small number of attributes and are irrespectful of people with different ones tolerant people have diversified values and respect social alterity we study the formation of values attached to various types of attributes and identify circumstances under which tolerance spontaneously arises policy may affect the evolution of tolerance in distinctive ways and there may be efficiency as well as equity reasons to promote tolerance an empirical investigation of tolerance of homosexuality demonstrates that our theory helps to shed light on survey data of endorsed values

price dispersion in the small and in the large evidence from an internet price comparison site this paper examines four million daily price observations for more than 1 000 consumer electronics products on the price comparison site http shopper com we find little support for the notion that prices on the internet are converging to the law of one price in addition observed levels of price dispersion vary systematically with the number of firms listing prices the difference between the two lowest prices the gap averages 23 per cent when two firms list prices and falls to 3 5 per cent in markets where 17 firms list prices these empirical results are an implication of a general clearinghouse model of equilibrium price dispersion

costly buyer search in laboratory markets with seller advertising in this experiment sellers simultaneously choose prices and advertising strategies buyers either purchase at an advertised price or search sequentially for other prices in the unique symmetric equilibrium sellers charge a high unadvertised price or advertise a price chosen from a lower interval increases in search or advertising costs raise equilibrium prices and affect equilibrium advertising intensity empirical results are consistent with most comparative static predictions sellers however price much lower and advertise more intensely than predicted consequently market outcomes more closely resemble a perfect information bertrand like equilibrium than the imperfect information mixed strategy equilibrium with significant seller market power

an experimental study of price dispersion in an optimal search model with advertising abstract this paper reports a laboratory experiment to study pricing and advertising behavior with costly buyer search sellers simultaneously post prices and may incur a cost to advertise this price in the unique symmetric equilibrium sellers either charge a high unadvertised price or randomize in an interval of lower advertised prices increases in search or advertising costs raise equilibrium prices and equilibrium advertising intensity decreases with lower search costs and higher advertising costs our experimental results support these comparative static predictions and sellers also post high unadvertised prices as predicted in all treatments however sellers advertise more intensely than in equilibrium

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

another perspective on the effects of inflation uncertainty this paper examines the effects of inflation uncertainty on real economic activity by utilizing a flexible dynamic multivariate framework that accommodates possible interaction between the conditional means and variances the empirical model is based on a familiar identified vector autoregressive framework modified to accommodate multivariate generalized autoregressive conditional heteroskedasticity our empirical model is preferred to the baseline var by likelihood based information criteria and it retains the important dynamics of the underlying var we find that an average shock to inflation uncertainty has tended to reduce output growth over three months by about 22 basis points

market contestability in the presence of sunk entry costs this article extends previous laboratory experimental research to examine the competitive discipline of contested markets with a natural monopoly type cost structure where sunk costs are neither zero nor infinite several alternative conjectures as to how or whether sunk costs can weaken the discipline of contested markets are presented and interpreted in the context of the experimental design sunk costs are found to weaken the support for strong interpretations of the contestable markets hypothesis and thus yield a wide diversity of dynamic patterns of market performance yet the disciplining power of contestability remains impressive with no indications of sustained monopoly pricing

a theory of ambiguity credibility and inflation under discretion and asymmetric information this paper develops a positive theory of credibility ambiguity and inflation under discretion and asymmetric information the monetary policymaker maximizes his own politically motivated objective function that is positively related to economic stimulation through monetary surprises and negatively related to monetary growth the relative importance he assigns to each target shifts stochastically through time his current preference trade off is known to him but not to the public when choosing the state contingent path of money growth for the present and the future the policymaker compares the benefits from current stimulation with the costs associated with higher future inflation expectations current monetary growth conveys information to the public about future money growth because there is persistence in the policymaker s objectives although expectations are rational information is imperfect because monetary control procedures are imprecise as a result the public cannot correctly distinguish persistent changes of emphasis on different policy objectives from transitory monetary control errors the public becomes aware of changes gradually by observing past monetary growth credibility is defined in terms of the speed with which the public recognizes changes in the objectives of the policymaker credibility is lower the noisier monetary control and the more stable the objectives of the policymaker looser monetary control and a higher degree of time preference on the part of the policymaker induce him to produce higher and more variable monetary growth when the policymaker is free to determine the accuracy of monetary control he does not always choose the most effective control available in spite of the fact that monetary surprises always have an expected value of zero the reason is that ambiguous control procedures enable the policymaker to generate positive surprises when he cares more than on average about economic stimulation he leaves the inevitable negative surprises for periods in which he cares more about inflation prevention this result provides an explanation for the fed s preference for ambiguity recently documented by goodfriend 1986 the policymaker is more likely to pick more ambiguous control procedures the more uncertain his objectives and the higher his time preference the paper also provides a theoretical underpinning for the well documented crosscountry positive correlation between the level and the variability of inflation

a laboratory study of advertising and price competition abstract we use a laboratory experiment to study advertising and pricing behavior in a market where consumers differ in price sensitivity equilibrium in this market entails variation in the number of firms advertising and price dispersion in advertised prices we vary the cost to advertise as well as varying the number of competing firms theory predicts that advertising costs act as a facilitating device higher costs increase firm profits at the expense of consumers we find that higher advertising costs decrease demand for advertising and raise advertised prices as predicted further this comes at the expense of consumers however advertising strategies are more aggressive than theory predicts with the result that firm profits do not increase

the fischer black hypothesis some time series evidence we estimate an arch m model to analyze the relationship between the conditional standard deviation of real gross national product gnp and its growth rate for the period 1871 1993 we find that variability significantly increases output growth rates in addition impulse response functions show that the effect of variability on growth rates is dynamic these results provide evidence in favor of black s 1987 business cycle hypothesis

understanding the us natural gas market a markov switching var approach abstract over the past three decades the us natural gas market has witnessed significant changes utilizing a standard bayesian model comparison method this paper formally determines four regimes existing in the market it then employs a markov switching vector autoregressive model to investigate the regime dependent responses of the market to its fundamental shocks the results reveal that the us natural gas market tends to be much more sensitive to shocks occurring in regimes existing after the decontrol act 1989 than the other regimes the paper also finds that shocks to the natural gas demand and price have negligible effects on natural gas production while the price of natural gas is mainly driven by specific demand shocks augmenting the model by incorporating the price of crude oil the results show that the impacts of oil price shocks on natural gas prices are relatively small and regime dependent

measuring the response of macroeconomic uncertainty to shocks recent research documents the importance of uncertainty in determining macroeconomic outcomes but little is known about the transmission of uncertainty across such outcomes this paper examines the response of uncertainty about inflation and output growth to shocks documenting statistically significant size and sign bias and spillover effects uncertainty about inflation is a determinant of output uncertainty whereas higher growth volatility tends to raise inflation volatility both inflation and growth volatility respond asymmetrically to positive and negative shocks negative growth and inflation shocks lead to higher and more persistent uncertainty than shocks of equal magnitude but opposite sign

are optimal search rules reasonable and vice versa and does it matter anyway abstract the economics of search has made rapid progress in recent years and its results have contributed siginificantly to economic knowledge recent work has been particularly marked for the steadily increasing realism of the assumptions describing the environment surrounding the searcher however concomitant with this improvement has been a steady growth in the technical complexity of the problem supposedly solved by the searcher indeed many of the recent models are so complicated that their solutions are beyond the capacity of even modern day computers after elaborating on this impracticability of optimal search rules the paper goes on to consider two more realistic and practical alternatives the adoption of either suboptimal or reasonable rules paradoxically reasonable rules may in some circumstances be better than optimal rules the paper contains a preliminary discussion of what might be meant by reasonable behaviour and shows that a minimal set of criteria for reasonableness leads to the major qualitative conclusions at a market level of optimal search theory

consumer search costs and market performance i introduction one of the seminal developments leading to the information economics revolution in the 1970s and 19c0s was diamond s 1971 theoretical result that in the absence of publicly posted price information the existence of even a small search cost could lead to monopoly pricing the intuition is straightforward no buyer with one price quote would want to search for a second unless it is likely that the buyer would encounter a price reduction that covers the search cost thus each seller has an incentive to price slightly above any common price and the noncooperative equilibrium in a single stage game yields a monopoly price this result is viewed as a paradox since a small search cost produces high prices but a zero search cost would produce the usual bertrand incentives that drive prices to competitive levels in the absence of capacity constraints and other imperfections 1 recent theoretical work has focused on finding a resolution to the paradox stahl 1989 for example generates a smooth transition between competitive and monopoly outcomes as the fraction of consumers with zero search costs increases from zero to one interestingly stahl finds that increasing the number of sellers makes pricing more monopolistic holding the number of informed buyers constant bagwell and ramey 1992 propose an alternative resolution that applies to an infinitely repeated market game where sellers who raise prices can develop a reputation that can affect sales in future periods bagwell and ramey show that buyers can obtain lower equilibrium prices by following a loyalty boycott search rule where low pricing sellers are rewarded with repeated purchases and high pricing sellers are punished with switching the price predictions vary continuously between monopoly and competitive levels depending on the size of the consumer search cost the policy relevance of the diamond paradox depends on whether there are realistic market environments in which small reductions in the availability of price information can cause large price increases 2 due to the difficulty of controlling and measuring information flows in natural markets the laboratory represents an ideal place to evaluate the diamond paradox and proposed resolutions the only experimental analysis of these issues is reported by grether schwartz and wilde 1988 who observed monopoly pricing in three of four predicted cases these results are suggestive but not definitive for reasons discussed below in particular as grether schwartz and wilde 1988 328 observe all four cases involved the same group of subjects to the extent possible this paper reports an experiment consisting of twelve market sessions designed to assess the effects of public price information the markets are conducted as normal posted offer markets except that buyers must pay a small cost each time they approach a different seller in baseline posted offer treatments all prices are publicly displayed to buyers while in search treatments prices are not publicly displayed in brief we find that prices approach competitive levels under the posted offer treatment and prices are significantly higher under the search treatment nevertheless the diamond prediction of monopoly pricing under search is not observed although increases in search costs do raise prices these results indicate that economists should take a more careful look at attempts to resolve the diamond paradox by introducing other factors that may impede monopoly pricing in markets with consumer search the paper is organized as follows our two primary treatments are outlined in section ii and results are presented in section iii the failure to observe the diamond monopoly price prediction motivated additional research on the effects of reputations and search costs which is presented in section iv the final section contains a conclusion ii

macro determinants of volatility and volatility spillover in energy markets abstract we analyze the time varying volatility and spillover effects in crude oil heating oil and natural gas futures markets by incorporating changes in important macroeconomic variables and major political and weather related events into the conditional variance equations we allow asymmetric responses to random disturbances in each market as well as to good and bad economic news related to the overall economy results show the presence of asymmetric effects in both random disturbances and macroeconomic variables a bidirectional volatility spillover effect is found between natural gas and crude oil and between the natural gas and heating oil markets crude oil volatility is found to increase following major political financial and natural events seasonality and day of the week effects are found in the crude oil and heating oil markets

understanding the development of fundamentalism we use economic theory to examine the intensity of fundamentalist sects in which leaders work to enhance their followers observance level we model three stylized situations under which fundamentalist groups function examining the intensity of observance in each we find that under reasonable conditions rivalry among fundamentalists makes them more extreme

the hayek hypothesis in experimental auctions institutional effects and market power the hayek hypothesis in experimental auctions institutional effects and market power we report twelve market experiments utilizing a seller market power supply and demand structure where two of five sellers can unilaterally increase their profit by withholding supply the data indicate that both the double auction and posted offer institutions result in traders extracting the bulk of the potential gains from exchange in the market however prices generally occur above the competitive equilibrium prediction market power in the form of strategic supply withholding does not appear to be responsible for the supra competitive prices i introduction one important result arising from experimental market research is that the information flows and contracting rules which define the institutional structure of a market can exert a pronounced influence on market performance such institutional features may be more important than some traditional structural characteristics in determining whether market outcomes will correspond to the predictions of the competitive model in particular a large and growing body of experimental data suggests that markets can generate efficient outcomes even when there are a relatively small number of buyers and sellers with incomplete information on the underlying structure of the market based on evidence from a wide variety of experimental double auction markets vernon smith 1982 167 has expressed this more formally as the hayek hypothesis markets economize on information in the sense that strict privacy together with the public messages of the market are sufficient to produce efficient ce competitive equilibrium outcomes in this statement however the notion of an efficient ce outcome could be interpreted as 1 a simple efficiency claim that all exchange surplus will be extracted or 2 a price claim that all exchange surplus will be extracted via trades at the competitive equilibrium price a recent study by holt langan and villamil 1986 hereafter hlv examines the validity of the hayek hypothesis using the double auction institution and a market structure designed to provide a rather difficult test for the competitive model hlv s market power design provides a subset of sellers with an incentive to unilaterally generate a price increase via the strategic withholding of supply the resulting price deviation from the competitive equilibrium is substantial but results in a relatively small loss of market efficiency thus the price interpretation of the hayek hypothesis is violated in this design if holders of market power recognize their position and successfully affect prices to their advantage the efficiency interpretation however will still hold approximately even with the successful exercise of market power in fact the price interpretation of the hayek hypothesis tends to break down in hlv s markets but the efficiency interpretation tends to hold hlv report deviations from the competitive equilibrium price consistent with the exercise of market power in three of five seller market power experiments they also conjecture that deviations from the competitive equilibrium may increase as participants become more experienced with the trading institution this paper reports the results of twelve experiments that build on hlv s research our experiments compare market performance in hlv s seller market power smp design using both the double auction and posted offer trading institutions our purpose in conducting these experiments is twofold first we are interested in examining the effects of changes in trading institutions on deviations from the competitive equilibrium price in the smp design second to the extent that competitive equilibrium price deviations are observed we are interested in assessing whether the exercise of market power in the form of strategic withholding is the source of these deviations

oligopolistic pricing with heterogeneous consumer search abstract a finite number of identical stores sell a homogeneous good to consumers with heterogeneous search costs who search sequentially with perfect recall and without replacement consumers search rules are optimal with respect to the stores pricing strategies and consumers must visit a store to obtain information about its actual price a symmetric nash equilibrium sne always exists the model exhibits a variety of equilibrium behaviors between monopoly pricing and marginal cost pricing the competitiveness of a market depends crucially on the shape of the search cost distribution moreso than on the number of competing firms

is more competition always better an experimental study of extortionary corruption using a laboratory experiment we assess whether increasing competition among public officials reduces extortionary corruption we find that increasing the number of providers has no effect on bribe demands when citizens search costs are high but it increases corruption when search costs are low the effect is absent in a parallel setting framed as a standard market which we attribute to citizens using a nonsequential search strategy as opposed to sequential search in the corruption setting we conclude that efforts to reduce search costs such as infrastructure investments are preferable to anti corruption policies aimed at increasing the number of providers jel d73 d49 c91

the asymmetric effects of monetary policy a nonlinear vector autoregression approach this paper tests for nonlinearity in a standard vector autoregression including output prices and money supply using an estimation strategy that is consistent with a wide range of structural macroeconomic models shocks to the money supply are found to have stronger output effects and weaker price effects when output growth is initially low positive and negative monetary shocks are found to have nearly symmetric effects in addition there is some evidence that shocks of different magnitudes have asymmetric effects these results are consistent with the view that the aggregate supply curve is convex

economic interactions and social tolerance a dynamic perspective we propose an evolutionary game to analyse the dynamics of tolerance among heterogeneous economic agents we show that i intolerance is much more persistent than tolerance ii a fully tolerant society assures prosperity iii cultural integration should precede economic integration

uncertainty and shopping behaviour an experimental analysis this paper reports experimental tests of three search equilibrium models these models which differ only in the search strategies available to the buyers have qualitatively different predictions that is equilibria price distributions single price equilibria at the competitive price and at the monopoly price and two price equilibria the experimental outcomes generally were consistent with the models predictions this suggests that debate on the utility of this class of models should shift to the realism of the models assumptions rather than focus on their ability to characterize market outcomes also since the basic models have been validated the project of analyzing experimentally the results of relaxing some of their assumptions seems worthwhile

oligopolistic pricing with sequential consumer search n identical stores compete by choosing prices for a homogeneous good with constant marginal costs consumers search sequentially with perfect recall for the lowest price one class of consumers called shoppers have zero search costs while all other consumers have a positive search cost c there is a unique symmetric nash equilibrium price distribution with the property that it changes smoothly from marginal cost pricing when all consumers are shoppers and or c 0 and monopoly pricing when no consumers are shoppers remarkably as the number of stores increases the nash equilibrium becomes more monopolistic copyright 1989 by american economic association

the asymmetric effects of uncertainty on inflation and output growth we study the effects of growth volatility and inflation volatility on average rates of output growth and inflation for post war us data our results suggest that increased growth uncertainty is associated with significantly lower average growth while higher inflation uncertainty is significantly negatively correlated with lower output growth and lower average inflation both inflation and growth display evidence of significant asymmetric response to positive and negative shocks of equal magnitude copyright 2004 john wiley sons ltd

the demand for transport fuels in turkey abstract in this paper we estimate the demand for transport fuels in turkey specifically using four different models namely a partial adjustment model a distributed lag model an autoregressive distributed lag model and an error correction model we estimate gasoline and diesel demand functions with quarterly data covering the period 2003 q1 2014 q3 we find a stable long run relationship only for diesel demand income and price our results imply that gasoline demand does not respond to income and price in the long run reflecting a shift from gasoline towards diesel induced by differential tax policies furthermore we find that transport fuel demand is price inelastic making tax on fuel a perfect tool for raising budget revenues in addition our results suggest that fuel demand responds to negative and positive price changes symmetrically

price setting and competition in a simple duopoly model the paper studies a market in which there are two sellers and one buyer each agent wants to trade at most one unit of an indivisible commodity the sellers are uncertain whether the buyer is receiving offers from one or both of them at any given time this model induces competitive and monopolistic outcomes for particular parameter values but other things being equal as the buyer becomes very patient the equilibrium price converges to the competitive one

a positive theory of inflation and inflation variance a positive theory of inflation and inflation variance empirically inflation and the variance of inflation are positively associated this paper develops a model that provides a potential explanation for this relationship in terms of the incentives facing the policymaker in a discretionary equilibrium the model can also account for an empirical association between inflation and measures of real output instability there is however no direct causal link whatever from the average rate of inflation to either the variance of inflation or that of real output i introduction the debate over the use rules or discretion in monetary policy has been central to macroeconomics for many years e g simons 1963 lucas 1980 buiter 1980 recently kydland and prescott 1977 and barro and gordon 1983a b have identified discretion as the absence of policy commitment in a game between policymakers and the public they argued that discretionary policymaking will lead governments to create excessive inflation a policy of low inflation is not consistent with incentives facing governments and thus will not be believed by the private sector barro and gordon 1983a argue that this positive theory of monetary policy can help to explain many features of the trend rate of inflation in modern economies high and persistent rates of inflation a positive relationship between inflation and unemployment and the observed countercyclical behaviour of monetary authorities among others these models are based on the premise that there are significant costs to a high but fully anticipated rate of inflation another feature of inflation in modern economics however is the well documented fact that inflation and the variability of inflation are positively associated this phenomenon has been widely observed over different countries at different times 1 this has led researchers to question the feasibility of a steady and predictable positive rate of inflation the finding suggests that high rates of inflation may reduce the ability to forecast future inflation rates a high average inflation rate may add an unnecessary degree of uncertainty to individual decision making and lead to a misallocation of resources friedman 1977 suggests that this may cause output instability and possibly raise the average unemployed rate a related paper by logue and sweeney 1981 establishes that there is a positive relationship between inflation and the variability of economic growth for industrial countries given this perspective the welfare costs associated with inflation might be considerably higher than the traditional costs of anticipated inflation this paper extends the barro and gordon 1983a model of discretionary monetary policy to take account of the relationship between inflation and measures of inflation and output variability the extension focussed on is to model an endogenous wage indexing scheme in the labor market in the discretionary equilibrium wage setters not only form rational expectations of the future price level but also choose an optimal degree of wage indexation this extension to the basic model has the following properties of a discretionary equilibrium 1 there is a positive association between the mean rate of inflation and the magnitude of real disturbances in the economy as well as between the mean inflation rate and the degree of output instability in the economy 2 in an economy where real disturbances are relatively important there is a positive association between the mean rate of inflation and the variance of inflation the explanation behind these results is as follows the lower is the degree of wage indexation the greater is the incentive for monetary authorities to cause surprise inflation and hence the higher is the mean rate of inflation in a discretionary equilibrium but the degree of wage indexation is negatively related to the variance of real disturbances in an economy which is subject to both real and nominal disturbances

characterizing nonlinearities in business cycles using smooth transition autoregressive models during the past few years investigators have found evidence indicating that various time series representing business cycles such as production and unemployment may be nonlinear in this paper it is assumed that if the time series is nonlinear then it can be adequately described by a smooth transition autoregressive star model the paper describes the application of these models to quarterly logarithmic production indices for 13 countries and europe tests reject linearity for most of these series and estimated star models indicate that the nonlinearity is needed mainly to describe the responses of production to large negative shocks such as oil price shocks

oil price uncertainty in canada bernanke bernanke ben s irreversibility uncertainty and cyclical investment quarterly journal of economics 98 1983 85 106 shows how uncertainty about energy prices may induce optimizing firms to postpone investment decisions thereby leading to a decline in aggregate output elder and serletis elder john and serletis apostolos oil price uncertainty http ssrn com abstract 908675 2009 find empirical evidence that uncertainty about oil prices has tended to depress investment in the united states in this paper we assess the robustness of these results by investigating the effects of oil price uncertainty in canada our results are remarkably similar to existing results for the united states providing additional evidence that uncertainty about oil prices may provide another explanation for why the sharp oil price declines of 1985 failed to produce rapid output growth impulse response analysis suggests that uncertainty about oil prices may tend to reinforce the negative response of output to positive oil shocks

a re examination of stationarity of energy consumption evidence from new unit root tests abstract in this paper we re examine the stochastic behaviour of per capita total primary energy consumption across 178 countries around the world for this purpose in addition to conventional unit root tests we apply newly developed tests that allow for nonlinear adjustments and structural breaks in the data generating process the results of the unit root tests show that allowing for structural breaks and nonlinearity result in more frequent rejection of the null hypothesis of unit root suggesting that most of the series under consideration follow a stationary process these findings imply that both energy economists and policy makers must be careful and take account of possible nonlinearities and structural breaks in their analyses of energy consumption in addition the results imply that government interventions into the energy markets in most countries have no effect in the long run although the short run effects of the interventions depend on the size and the direction of interventions

on the cultural transmission of preferences for social status abstract we study the formation of preferences for social status as the result of intergenerational transmission of cultural traits we characterize the behavior of parents with preferences for status in terms of socialization of their children to this particular cultural trait we show that degenerate distributions of the population whereby agents have either all status preferences or all non status preferences are dynamically unstable moreover under some conditions there exists a unique stationary distribution which is non degenerate in which both status and non status preferences co exist in the population and this distribution is locally stable finally we study the dependence of the stable stationary distribution of status preferences on institutional technological and policy parameters which affect agents economic conditions

economics and identity this paper considers how identity a person s sense of self affects economic outcomes we incorporate the psychology and sociology of identity into an economic model of behavior in the utility function we propose identity is associated with different social categories and how people in these categories should behave we then construct a simple game theoretic model showing how identity can affect individual interactions the paper adapts these models to gender discrimination in the workplace the economics of poverty and social exclusion and the household division of labor in each case the inclusion of identity substantively changes conclusions of previous economic analysis

the link between volatility and growth evidence from the states we present evidence on the relationship between output volatility and growth using state data no evidence of such a relationship is found once other correlates of growth are incorporated into the analysis this finding contradicts published results using international data some possible explanations for the contradictory results are discussed

costly buyer search in a differentiated products model an experimental study this study examines whether the content of buyer information and the timing of its dissemination affects seller market power we construct laboratory markets with differentiated goods and costly buyer search in which sellers simultaneously post prices the experiment varies the information on price or product characteristics that buyers learn under different timing assumptions pre and postsearch generating four information treatments theory predicts that price information lowers the equilibrium price but information about product characteristics increases the equilibrium price that is contrary to intuition the presence of informed buyers may impart a negative externality on other uninformed buyers data support the model s negative externality result when sellers face a large number of robot buyers that are programmed to search optimally observed prices conform to the model s comparative statics and are broadly consistent with predicted levels with human buyers however excessive search instigates increased price competition and sellers post prices that are significantly lower than predicted

the simple analytics of optimal growth with illegal migrants a clarification abstract this paper reexamines the welfare effects of illegal immigration studied by hazari and sgro the simple analytics of optimal growth with illegal migrants journal of economic dynamics and control 28 1 141 151 in contrast to their negative conclusion we obtain ambiguous welfare prediction which is due to the presence of two opposing effects at work a positive exploitation effect and a negative intertemporal effect with cobb douglas production technology we show that per capita domestic consumption rises in the presence of illegal migration

informative price advertising in a sequential search model the purpose of this paper is to study the role and implications of price advertising when shopping trips are costly to consumers to do so we introduce advertising into an optimal sequential search model information about prices is both gathered by consumers and disseminated by firms consumers search sequentially and stores advertise with various intensity when it is in their interest to do so our model has a unique equilibrium exhibiting priee dispersion the model generates predictions about the shape of the price distribution and firms advertising behavior we explore the effects of entry and find that when initial advertising costs at zero level of effort are precisely zero entry drives the equilibrium to the perfectly competitive outcome however when initial marginal advertising costs are positive entry drives prices higher and while the informed consumers almost surely locate competitive prices welfare does not necessarily increase finally we compare the effectiveness of the two informational channels when advertising costs shrink prices become competitive however when search costs shrink prices remain bounded above marginal production costs

oil price uncertainty and unemployment abstract in this study we empirically search the effects of oil price uncertainty and oil price shocks on u s unemployment rate using a garch in mean var model for the period 1974 q2 2017 q4 based on our findings we show that oil price uncertainty significantly increases unemployment rate in the u s economy likewise our impulse response analysis affirms that a positive oil price shock increases unemployment while the response of unemployment to a negative oil price shock is negative moreover we reveal that unemployment rate reacts to positive and negative shocks asymmetrically more specifically the response of unemployment to negative oil price shocks is negative and slighter in size besides oil price uncertainty is found to magnify the rise in the u s unemployment rate these findings are in keeping with the real options theory which reveals that the uncertainty about goods prices leads firms to postpone or abandon their production and investment and they seem to be robust to the use of different real oil price measures

economic search an experimental study this paper presents results of experiments designed to test several of the hypotheses present in the theoretical literature on optimal economic search first we test whether the subjects searchers actually search for wages in ways that are consistent with setting an optimal reservation wage we then proceed to determine experimentally the effects of risk aversion increased search costs changes in risk brought about by a mean preserving transformation of the distribution of wage offers the presence or absence of recall the existence of a finite horizon and the searcher s state of knowledge about the underlying distribution of wages in general we find that the searchers exhibit behavior that is consistent with that predicted by theory differences between risk neutral and risk averse searchers are found and the responses of both groups to changes in search costs in the degree of risk or in the state of knowledge are consistent with theoretical predictions

the relationships between petroleum and stock returns an asymmetric dynamic equi correlation approach in this paper we propose an asymmetric dynamic equi correlation adeco model to investigate the correlations between returns of petroleum futures and stock indices our adeco reveals the in sample significant asymmetric effect in oil stock correlations to evaluate out of sample performance we consider a portfolio with petroleum futures and stocks in which the weights are determined by forecasts of covariance matrix we find that adeco provides portfolios with better performances than existing popular deco dcc and adcc models in the minimum variance framework moreover energy price risk can be better hedged by stocks in oil exporting countries than stocks in oil importing countries our findings are further demonstrated to be robust to the change of futures maturity

dynamic structure of the spot price of crude oil does time aggregation matter abstract this paper assesses nonlinear structures in the time series data generating mechanism of crude oil prices we apply well known univariate tests for nonlinearity with distinct power functions over alternatives but with different null hypotheses reflecting the existence of different concepts of linearity and nonlinearity in the time series literature we utilize daily data on crude oil spot price for over 26 years as well as monthly data on crude oil spot price for 41 years investigating the monthly price of crude oil along with the daily price distinguishes the approach of this paper from existing studies focusing on the time series structure of crude oil price all the tests detect strong evidence of general nonlinear serial dependence as well as nonlinearity in the mean variance and skewness functions in the daily spot price of crude oil since evidence of nonlinear dependence is less dramatic in monthly observations nonlinear serial dependence is moderated by time aggregation in crude oil prices but not significantly

the dynamics of price dispersion or edgeworth variations abstract hypotheses on the dynamics of dispersed prices are extracted from computer simulations and theory and are tested using laboratory data as predicted in some variations of the edgeworth hypothesis the data exhibit a significant cycle relative to the unique stationary distribution the empirical distribution of posted prices has excess mass in an interval that declines until it approaches the lower boundary of the stationary distribution then jumps upward and the downward cycle resumes the amplitude of the cycle seems fairly constant over the longer experimental sessions a hybrid of gradient dynamics and logit dynamics seems to best reproduce the observed dynamics

an experimental study of price dispersion abstract we report an experiment examining a simple clearinghouse model that generates price dispersion according to this model price dispersion arises because of consumer heterogeneity some consumers are informed and simply buy from the firm offering the lowest price while the remaining consumers are captive and shop based on considerations other than price in our experiment we observe substantial and persistent price dispersion we find that as predicted an increase in the fraction of informed consumers leads to more competitive pricing for all consumers we also find as predicted that when more firms enter the market prices to informed consumers become more competitive while prices to captive customers become less competitive thus our experiment provides strong support for the model s comparative static predictions about how changes in market structure affect pricing

asymmetries in the dynamic interrelationship between energy consumption and economic growth evidence from turkey abstract in this study we examine possible nonlinearities in dynamic interrelationship between energy consumption and economic growth in turkey for the 1960 2010 period by using a smooth transition vector autoregressive model in order to trace the effects of one variable on another we calculate generalized impulse response functions girfs the computed impulse response functions demonstrate asymmetric effects of positive versus negative and small versus large energy consumption shocks on output growth and vice versa specifically we find that negative energy shocks have a greater effect on output growth than positive energy shocks and that big negative energy shocks affect output much more than small negative energy shocks similarly we find that positive output shock has a greater effect on energy consumption whereas negative shocks have almost no effect on energy consumption the results of this study have clear and important implications for energy economists and policymakers in turkey

asymmetric reactions of the us natural gas market and economic activity this paper provides new empirical evidence on the asymmetric reactions of the us natural gas market and us economy to its market fundamental shocks we find that results based on a smooth transition vector autoregressive stvar model provides a plausible and robust explanation to the behavior of the us natural gas market which asymmetrically reacts in bad times and good times during times of recession natural gas production shrinks in response to a positive oil price shock while the corresponding response is found to be positive in times of expansion the positive relationship between the price of natural gas and crude oil is found to be more prominent in expansions especially in the long run in addition the results also reveal that us economic activity is much more sensitive to oil and natural gas price shocks occurring in bad times than in good times

buyer search and price dispersion a laboratory study we study markets with costly buyer search in which sellers simultaneously post prices buyers costlessly observe one or with probability 1 q two of the posted prices and can accept one or pay to search again the experiment varies q the search cost and the number of buyers equilibrium theory predicts a unified very low high price for q 0 q 1 and predicts specific distributions of dispersed prices for q 1 3 and 2 3 actual prices conform closely to the predictions in some treatments buyers reservation prices are biased away from the extremes however and sellers prices have positive autocorrelation and cross sectional correlation

the asymmetric effects of oil price and monetary policy shocks a nonlinear var approach in this paper we investigate the asymmetric effects of oil price shocks and monetary policy on macroeconomic activity using monthly data for the united states over the period from 1983 1 to 2008 12 in doing so we use a logistic smooth transition vector autoregression var as detailed in terasvirta and anderson 1992 and weise 1999 and make a distinction between two oil price volatility regimes high and low using the realized oil price volatility as a switching variable we isolate the effects of oil price and monetary policy shocks and their asymmetry on output growth and following koop et al 1996 and weise 1999 we employ simulation methods to calculate generalized impulse response functions girfs to trace the effects of independent shocks on the conditional means of the variables our results suggest that in addition to the price of oil oil price volatility has an impact on macroeconomic activity and that monetary policy is not only reinforcing the effects of oil price shocks on output it is also contributing to the asymmetric response of output to oil price shocks

are daily and weekly load and spot price dynamics in australia s national electricity market governed by episodic nonlinearity in this article we use half hourly spot electricity prices and load data for the national electricity market nem of australia for the period from december 1998 to june 2009 to test for episodic nonlinearity in the dynamics governing daily and weekly cycles in load and spot price time series data we apply the portmanteau correlation bicorrelation and tricorrelation tests introduced in hinich 1996 to the time series of half hourly spot prices and load demand from 7 12 1998 to 30 06 2009 using a fortran 95 program we find the presence of significant third and fourth order nonlinear serial dependence in the weekly load and spot price data in particular but to a much more marginal extent in the daily data

consumer search behavior and sunk costs abstract this paper presents the results of four economic experiments involving 41 undergraduate students who were assigned the task of searching for the lowest price from a known distribution of prices economic theory predicts that individuals should continue to draw until the expected gain of another search is less than the marginal search cost additionally once individuals have made a draw and then continued they should never return to a price drawn earlier exercise recall both of these predictions are tested in the paper and the results show that behavior is not always consistent with them it appears that individuals are making decisions based on the total return from searching rather than simply the marginal return from another draw

the effect of recessions on the relationship between output variability and growth this paper investigates the relationship between output volatility and growth using post war real gdp data for the united states we expand on recent research by beaudry and koop 1993 documenting the asymmetric effect of recessions on output growth the results presented in this paper suggest that output volatility is highest when the economy is contracting while we find that the economy expands most rapidly following a recession this expansion is offset by the negative impact of output uncertainty

inflation and uncertainty tests for temporal ordering for the postwar united states increases in the rate of inflation tend to precede increases in the level of inflation uncertainty the finding suggests that higher inflation uncertainty is part of the welfare cost of inflation possible explanations are 1 a high rate of inflation increases uncertainty about future monetary policy and 2 there is uncertainty about the persistence of inflation copyright 1995 by ohio state university press

modeling asymmetric comovements of asset returns existing time varying covariance models usually impose strong restrictions on how past shocks affect the forecasted covariance matrix in this article we compare the restrictions imposed by the four most popular multivariate garch models and introduce a set of robust conditional moment tests to detect misspecification we demonstrate that the choice of a multivariate volatility model can lead to substantially different conclusions in any application that involves forecasting dynamic covariance matrices like estimating the optimal hedge ratio or deriving the risk minimizing portfolio we therefore introduce a general model which nests these four models and their natural asymmetric extensions the new model is applied to study the dynamic relation between large and small firm returns article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

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