an alternative view of pricing in retail food markets the pricing mechanism of intracity retail food markets has received the attention of agricultural economists who are interested in the competitive nature of food price determination attention has focused on the information theory paradigm and potential impact of publically available comparative price reports in this paper a spatial economic model is developed to describe and analyze consumer choice seller behavior and price determination in retail food markets empirical evidence is then used to test hypotheses developed from the spatial model it is concluded that the spatial model offers added explanatory power of observed food market responses to retail price reporting

asymmetry in retail wholesale and shipping point pricing for fresh vegetables the linkage among retail wholesale and shipping point prices for a select group of fresh vegetables is measured using wolffram s asymmetry model procedures for dealing with discontinuous time series are shown and granger s causality test is used to show the direction of the price linkage wholesale prices are shown to lead both retail and shipping point prices asymmetry in the retail wholesale response indicates that wholesale price decreases are reflected at the retail more so than are wholesale price increases wholesale price decreases are more fully passed through to the shipping point relative to wholesale increases

demand information and competition why do food prices fall at seasonal demand peaks prices for seasonal food products fall at demand peaks price declines are not driven by falling agricultural input prices indeed farm to retail margins narrow sharply i use electronic scanner data from a sample of us supermarkets to show that seasonal price declines are closely linked to market concentration and are much larger in markets with several rivals than where a single brand dominates seasonal demand increases reduce the effective costs of informative advertising and increased informative advertising by retailers and manufacturers in turn may allow for increased market information and greater price sensitivity on the part of buyers

time series econometric analyses of biofuel related price volatility time series econometrics studies have analyzed volatility interactions between biofuel and food and fossil fuel markets we review data modeling techniques and the main findings in the literature and present our latest contributions we identify areas for further research

bayesian analysis of the output gap our objective is to build output gap estimates that benefit from information provided by phillips curve theory and business cycle studies for this we develop a bayesian analysis of the bivariate phillips curve model proposed by kuttner for estimating potential output given our priors we obtain samples from parameters and state variables joint posterior distribution following a gibbs sampling strategy we sample the state variables given parameters using the carter kohn procedure and we exploit a likelihood factorization to draw parameters given the state a metropolis hastings step is used to remove the conditioning on starting values to accommodate the variance moderation that has been observed on u s gross domestic product kuttner s model is extended for a change in variance parameters we apply this methodology to the analysis of the output gap in the united states and in the european monetary union finally some important extensions to the original kuttner model are discussed

countercyclical pricing a consumer heterogeneity explanation we show that a seasonal good could be priced countercyclically due to the heterogeneous seasonal shifts in consumer valuations we provide empirical support for our explanation based on two product categories canned soup and tuna studied in the literature

non stationarities in financial time series the long range dependence and the igarch effects we give the theoretical basis of a possible explanation for two stylized facts observed in long log return series the long range dependence lrd in volatility and the integrated garch igarch both these effects can be explained theoretically if one assumes that the data are nonstationary

wage stickiness and the non neutrality of money a cross industry analysis abstract the paper provides an empirical test of sticky wage models of business fluctuations by focusing on industry level cross sectional implications that emerge this breaks the observational equivalence existing at the aggregate level between rational expectations long term contracting and imperfect information models the specific implication tested is whether output responses to nominal disturbances industry phillips curve slopes are inversely related to wage indexation elasticities the phillips curve slopes are found to vary across industries for the canadian economy but bear no relationship to indexation elasticities casting doubt on the role of nominal wage rigidity in generating the observed non neutrality of money

immigration and prices this paper examines the behavior of prices following the unexpected arrival of a large number of immigrants from the former soviet union fsu to israel during 1990 i use store level price data on 915 consumer price index products to show that the increase in aggregate demand prompted by the arrival of the fsu immigration significantly reduced prices during 1990 when one controls for native population size and city and month effects a one percentage point increase in the ratio of immigrants to natives in a city decreases prices by 0 5 percentage point on average it is argued that this negative immigration effect is consistent with fsu immigrants the new consumers having higher price elasticities and lower search costs than the native population thus immigration can have a moderating effect on inflation through its direct effect on product markets and not only by increasing the supply of labor

regime changes in international real interest rates are they a monetary phenomenon in this paper we use the bai and perron 1998 2001 2003 methodology to test for multiple structural breaks in the mean real interest rate for 13 industrialized countries we find extensive evidence of structural breaks in the mean real interest rate for all 13 countries in an attempt to explain the breaks in international real interest rates we also test for multiple structural breaks in the mean inflation rate for the 13 countries once again we find extensive evidence of structural breaks in the mean inflation rate for all of the countries interestingly the breaks in inflation rates and real interest rates often coincide with increases decreases in the mean inflation rate as we move from one regime to the next typically associated with decreases increases in the mean real interest rate

the timing and magnitude of retail store markdowns evidence from weekends and holidays we examine daily prices of eight goods at seventeen retail stores collected in ann arbor michigan over a four month period from november 1 to february 28 we focus on weekly and seasonal price patterns and on the frequency of price markdowns or sales there were frequent markdowns in the intensive shopping period prior to christmas and a tendency for such sales to occur on weekends we interpret these findings as evidence that a significant number of markdowns are timed to occur when shopping intensity is exogenously high we complement the imperfect information based motives for sales in the literature by contributing an additional element based on the role of bulk shopping and increasing returns in the shopping technology

maximum likelihood estimation of search costs abstract in a recent paper hong and shum 2006 using price distributions to estimate search costs rand journal of economics 37 257 275 present a structural method to estimate search cost distributions we extend their approach to the case of oligopoly and present a new maximum likelihood method to estimate search costs we apply our method to a data set of online prices for different computer memory chips the estimates suggest that the consumer population can be roughly split into two groups which either have quite high or quite low search costs search frictions confer a significant amount of market power to the firms despite more than 20 firms operating in each of the markets we estimate price cost margins to be around 25 the paper also illustrates how the structural method can be employed to simulate the effects of the introduction of a sales tax

patterns of retail price variation we examine retail price variation across a range of goods and regions of the united states we find that the typical grocery product has a regular price and stays at that price at least 50 of the time and that most deviations from that regular price are downward temporary discounts or sales while infrequent account for 20 to 50 of the annual variation in retail prices for most product categories although existing models of retail sales yield predictions consistent with some aspects of the retail pricing distributions all of these models fail to explain other important aspects of retail pricing identified here

on the counter cyclicality of prices and markups in a cournot model of entry abstract we prove in a cournot model that the price and markup are counter cyclical due to changes in the extent of competition if the income effect is decreasing in the price as occurs when preferences are homothetic or demand is isoelastic

price transmission across the u s food distribution system price transmission models are estimated using recursive methods across 100 food commodities from the individual commodities short and long run price transmission coefficients are estimated for rising and falling prices these coefficients are classified into five commodity categories and expressed as one vector while coding for causality market levels rising falling prices short and long run and time period then the impact of each variable is estimated and inferences are drawn about the degree of price transmission results show that price linkages are strong but slightly declining over time with some evidence of asymmetric behavior long run rising prices are passed through more than long run falling prices except for fruits and vegetables

price dispersion over the business cycle evidence from the airline industry this study provides empirical evidence documenting how price dispersion moves with the business cycle in the airline industry performing a fixed effects panel analysis on seventeen years of data covering two business cycles we find that price dispersion is highly pro cyclical this effect is especially pronounced for legacy carriers relative to low cost carriers we show that our empirical result is consistent with firms implementing second degree price discrimination tactics

seasonality and the effect of advertising on price does advertising make markets more or less competitive this paper lays out an econometric strategy for estimating the effect of advertising on prices that exploits seasonal demand and imperfect targeting of consumers we find mostly negligible effects of advertising on prices at monthly frequency among the 35 of 131 product categories with sufficient advertising seasonality to justify second stage estimation only nine have a significant effect and those are typically small this finding is essentially the result of the much greater seasonality in advertising than price

cyclic pricing by a durable goods monopolist in the model of this paper a monopoly seller of a durable good holds periodic sales as a means of price discrimination a new cohort of consumers enters the market in each period interested in purchasing the good either immediately or after a delay within each cohort consumers vary in their tastes for the good under broad conditions the seller will vary the price over time in most periods he will charge a price just low enough to sell immediately to consumers with a high willingness to pay periodically however he will drop the price far enough to sell to an accumulated group of consumers with a low willingness to pay

real wages over the business cycle evidence from panel data one topic on which keynes did not disagree with classical economists was the cyclical behavior of real wages keynes 1936 as well as various classical writers predicted that real wages should move countercyclically quoting the general theory p 17 in general an increase in employment can only occur through the accompaniment of a decline in real wages thus i am not disputing this vital fact which the classical economists have rightly asserted as indefeasible this prediction is based on the premise of competition and a given short run capital stock increases in employment then correspond to more intensive use of capital and through diminishing product lower real wages for this reason evidence by dunlop 1938 and tarshis 1939 that real wages move procyclically was viewed as paradoxical both dunlop and tarshis based their findings on an observed positive correlation between real and money wages which given the procyclical movement of money wages implies a positive correlation between

price volatility in niger millet markets price volatility of food staples is one of the most complex factors affecting food security recent food price crises have raised academic interest in improved volatility assessment the widely held assumption in econometric volatility models that long run volatility is constant has been recently questioned and partly blamed for these crises a multiplicative mgarch model recently proposed by bauwens et al is used in this article to model price volatility transmission along the niger millet marketing chain results suggest important volatility links between consumer and producer prices as well as noteworthy differences between short and long run price dynamics

demand uncertainty and sales a study of fashion and markdown pricing the theory of clearance sales is expanded and applied to explain why markups markdowns and the frequency of sales of merchandise sold by department stores have increased dramatically in recent years and why they differ across merchandise groups tha major theme of the paper is that the growing role of fashion and product variety is an important reason for these increases and for the differences between merchandise groups the growing importance of fashion is illustrated by documenting the declining use of whites and the increasing use of colors and prints estimates of the effects of imports and technological and demographic changes on markups and markdowns are presented copyright 1988 by american economic association

riding the waves revealing the impact of intrayear category demand cycles on advertising and pricing effectiveness abstractgoing beyond traditional seasonality this research introduces the concept of the intrayear category demand cycle this phenomenon reflects demand cycles most consumer packaged goods categories experience throughout the year with periods of higher demand following periods of lower demand the author argues that acknowledging the existence of these cycles and understanding their impact on both advertising and pricing effectiveness and practice is critical for marketers specifically the author demonstrates how both advertising and price elasticities and observed advertising and prices evolve along these cycles for a unique set of 252 brands ranging from high advertising high priced premium mass brands to low advertising low priced value niche brands in 61 consumer packaged goods categories overall both advertising efectiveness and observed advertising are found to be stronger at demand peaks surprisingly consumer reactions to price decreases are weaker at demand peaks whereas reactions

asymmetry and rigidity in farm retail price transmission this article demonstrates how retail price transmission asymmetry can arise from intertemporal optimizing behavior among spatially competitive retailers facing concave spatial demand and shows that vigorous competition among retailers may not necessarily result in the larger retail price declines farmers expect during periods of declining farm prices it also shows that when this particular class of retailers incurs repricing costs retail prices can be rigid over a range of upward and downward movements in the farm price this suggests that the rigidity of retail prices during periods of declining farm prices could be due to repricing costs it also suggests that the appropriate econometric model of price transmission is the model of friction where tobit analysis is the proper method of estimation rather than nonreversible functions

prices rise faster than they fall output prices tend to respond faster to input increases than to decreases this tendency is found in more than two of every three markets examined it is found as frequently in producer goods markets as in consumer goods markets in both kinds of markets the asymmetric response to cost shocks is substantial and durable on average the immediate response to a positive cost shock is at least twice the response to a negative shock and that difference is sustained for at least five to eight months unlike past studies which documented similar asymmetries in selected markets gasoline agricultural products etc this one uses large samples of diverse products 77 consumer and 165 producer goods accordingly the results suggest a gap in an essential part of economic theory as a start on filling this gap the study finds no asymmetry in the resonse of an individual decision maker a supermarket chain to its costs but it finds above average asymmetry where a cost shock is filtered through a fragmented w

on fruitful and futile tests of the relationship between search and price dispersion we exploit cross sectional and temporal differences in search intensity in order to examine the relationship between search costs and price dispersion using a hand collected panel data set from jerusalem s shuk mahane yehuda outdoor market we present empirical evidence that price dispersion increases with the cost of search using several different measures of price dispersion however our interpretation of this finding is sensitive to the search proxy in question we also address several acute difficulties facing empiricists seeking to test theoretical price dispersion models in which consumers are heterogeneous in their search behavior jel l11 l13

volatility linkages between energy and agricultural commodity prices abstract we investigate price and volatility risk originating in linkages between energy and agricultural commodity prices in germany and study their dynamics over time we propose an econometric approach to quantify the volatility and correlation risk structure which has a large impact for investment and hedging strategies of market participants as well as for policy makers volatilities and their short and long run linkages are analyzed using an asymmetric dynamic conditional correlation garch model as well as a multivariate multiplicative volatility model our approach provides a flexible and accurate fitting procedure for volatility and correlation risk we find that in the long run prices move together and preserve an equilibrium while correlations are mostly positive with persistent market shocks our results reveal that concerns about biodiesel being the cause of high and volatile agricultural commodity prices are rather unjustified

indivisible labor lotteries and equilibrium abstract this paper considers an economy where labor is indivisible and agents are identical although the discontinuity in labor supply at the individual level disappears as a result of aggregation it is shown that indivisible labor has strong consequences for the aggregate bahavior of the economy it is also shown that optimal allocations involve lotteries over employment and consumption

understanding long run price dispersion abstract a unique panel of retail prices spanning 123 cities in 79 countries from 1990 to 2005 is used to uncover the novel properties of long run international price dispersion at the ppp level almost all of price dispersion is attributed to unskilled wage dispersion at the level of individual goods and services the average contribution of these wages is significantly reduced reflecting that good specific sources of price dispersion such as trade costs and good specific markups tend to average out across goods at the lop level borders and distance contribute about equally to price dispersion that is rising in the distribution share

measuring the dollar euro permanent equilibrium exchange rate using the unobserved components model this paper employs an unobserved component model that incorporates a set of economic fundamentals to obtain the euro dollar permanent equilibrium exchange rates peer for the period 1975q1 to 2008q4 the results show that for most of the sample period the euro dollar exchange rate closely followed the values implied by the peer the only significant deviations from the peer occurred in the years immediately before and after the introduction of the single european currency the forecasting exercise shows that incorporating economic fundamentals provides a better long run exchange rate forecasting performance than a random walk process

financial intermediation business failures and real business cycles in this paper a general equilibrium business cycle model is construct ed that when subjected to real disturbances mimics observed qualita tive comovements among real output money business failures risk pr emia intermediary loans and prices in contrast monetary disturban ces generate cycles that have several inconsistencies with empirical evidence thus providing support for real business cycle theory at th e expense of monetary theories of the business cycle financial inter mediation arises endogenously in the model and intermediation matters for business cycle behavior a credit supply mechanism acts in tande m with an intertemporal substitution effect in propagating stochastic disturbances copyright 1987 by university of chicago press

indivisible labor and the business cycle abstract a growth model with shocks to technology is studied labor is indivisible so all variability in hours worked is due to fluctuations in the number employed we find that unlike previous equilibrium models of the business cycle this economy displays large fluctuations in hours worked and relatively small fluctuations in productivity this finding is independent of individuals willingness to substitute leisure across time this and other findings are the result of studying and comparing summary statistics describing this economy an economy with divisible labor and post war u s time series

bubbles in food commodity markets four decades of evidence abstract we use daily prices from individual futures contracts to test whether speculative bubbles exist in 12 agricultural markets and to identify whether patterns of bubble behavior exist over time the samples begin as far back as 1970 and run through 2011 the findings demonstrate that all 12 agricultural markets experienced multiple periods of price explosiveness however bubble episodes represent a very small portion between 1 5 and 2 of price behavior during the 42 year period in addition most bubbles are short lived with 80 90 lasting fewer than 10 days though receiving far less attention negative bubbles contribute significantly to price behavior accounting for more than one third of explosive episodes markets over react during both positive and negative explosive episodes leading to a correction as they return to a random walk this adjustment back to fundamental values is most pronounced with positive bubbles particularly in the earlier part of the sample while the magnitudes of the corrections are generally small there were a few instances of significant increases in prices and large over reactions most notably in the softs e g cocoa 1973 coffee 1994 cotton 2010 we also find that explosive periods did not become more common or last longer in the second half of the sample period and that the most recent bubble episodes may not have been as severe as in mid 1970s

asymmetry in farm retail price transmission for major dairy products an econometric model is used to estimate the net relationship between changes in the farm level price of milk and changes in the retail prices of four major dairy products fluid milk butter cheese and ice cream results indicate that the farm retail price transmission process in the dairy sector is asymmetric retail dairy product prices adjust more rapidly and more fully to increases in the farm price of milk than to decreases the role in pricing asymmetry of retail demand versus farm supply shifts is tested via a chow type test asymmetry is tested using the houck procedure for estimating nonreversible functions

asymmetric farm retail price transmission and market power a new test a finite mixture model is used to estimate farm retail price transmission in the us fresh strawberry market results suggest two distinct pricing regimes associated with off and peak harvesting seasons the market power parameter is significant in the peak harvest regime but not in the off peak regime moreover price changes are transmitted completely throughout the marketing channel in the off peak regime when the market power parameter is zero but not in the peak harvest regime when the market power parameter is positive this suggests that produce buyers are more apt to exercise market power when farm supplies are abundant than when they are scarce and that the exercise of such power causes the farm retail price linkage to become asymmetric

pass through in retail and wholesale this paper studies how prices comove across products firms and locations to gauge the relative importance of retailer versus manufacturer level shocks in determining prices i make use of a large panel data set on prices for a cross section of retailers in the u s i analyze prices at the barcode or universal product code upc level for individual stores i find that only 16 of the variation in prices is common across stores selling an identical product 65 of the price variation is common to stores within a particular retail chain but not across retail chains while 17 is completely idiosyncratic to the store and product product categories with frequent temporary sales exhibit a disproportionate amount of completely idiosyncratic price variation my results suggest that most of the observed price variation arises from retail level rather than manufacturer level demand and supply shocks however the behavior of prices is difficult to relate to observed variation in costs and demand at the retail level this suggests that retail prices may vary largely as a consequence of dynamic pricing strategies on the part of retailers or manufacturers rather than static demand and supply shocks this abstract was borrowed from another version of this item

price transmission and local market power empirical evidence from the austrian gasoline market we analyse the impact of local market power on price margins and different dimensions of price adjustment dynamics speed and asymmetry of price transmission using data for a large number of indiv

optimal fiscal and monetary policy in an economy without capital abstract this paper is concerned with the structure and time consistency of optimal fiscal and monetary policy in an economy without capital in a dynamic context optimal taxation means distributing tax distortions over time in a welfare maximizing way for a barter economy our main finding is that with debt commitments of sufficiently rich maturity structure an optimal policy if one exists is time consistent in a monetary economy the idea of optimal taxation must be broadened to include an inflation tax and we find that time consistency does not carry over an optimal inflation tax requires commitment by rules in a sense that has no counterpart in the dynamic theory of ordinary excise taxes the reason time consistency fails in a monetary economy is that nominal assets should from a welfare maximizing point of view always be taxed away via an immediate inflation in a kind of capital levy this emerges as a new possibility when money is introduced into an economy without capital

does asymmetry in price transmission exist in the rice market in sri lanka abstractthis study analyses asymmetry in price transmission between wholesale and retail rice markets in sri lanka using the threshold autoregressive model we found that the wholesale and the retail rice markets in sri lanka are integrated with price changes moving from the wholesale to the retail market however the price transmission process is asymmetric in particular price increases at the wholesale market transmit immediately to the retail market while price decreases transmit more slowly parameter stability test and follow up analysis indicated that the price transmission process is asymmetric only during periods of price surges suggesting that the rice market is not efficient during these periods

the loss leader is a turkey targeted discounts from multi product competitors abstract i show that multi product firms can compete for their more profitable customers by setting lower margins on goods that are purchased primarily by them effectively offering them discounts without offering these discounts to less profitable customers this suggests a theory of multi product pricing in which a good s profit margin is inversely related to the profitability of the customers who purchase it this theory i provides one explanation for firms offering lower prices to larger customers and ii suggests that loss leader pricing may allow firms to compete more vigorously for more profitable customers this can explain why stores sell turkeys as loss leaders at thanksgiving but may not discount flowers on mother s day or candy on valentines day

the effect of ethanol policies on the vertical price transmission in corn and food markets this paper analyzes the impact of ethanol policies on price transmission along the food supply chain we consider the us corn sector and its vertical links with food and ethanol energy markets we find that ethanol is a source of imperfect price transmission in the food supply chain ethanol however alters price transmission only under a binding blender s tax credit and only from food to corn not vice versa our results indicate that ethanol weakens the response of corn and food prices in terms of their level changes to shocks occurring in agricultural corn and food markets the results are robust to different assumptions on the model parameters although market power has previously been identified as a source of imperfect price transmission in the food supply chain our findings show that in the presence of ethanol the imperfect price transmission may occur even if markets are perfectly competitive this warrants careful evaluation of markets before any policy intervention

price transmission and asymmetric adjustment in the u s beef sector the u s livestock sector has experienced numerous structural changes in recent years for example the meatpacking industry has experienced many mergers and acquisitions leading to significant increases in industry concentration in particular the four firm concentration ratio for steer and heifer slaughter a frequently cited statistic and an important indicator of industry concentration increased from 35 7 in 1980 to 79 8 in 1997 usda there have also been significant regional shifts in livestock production and changes in marketing practices with decreased use of public markets in many areas for some products traditional auction markets have been largely replaced by contract production and sales cattle inventories have also trended downward over the last two decades this has been accompanied by decreases in the number of producers and in some cases with significant increases in the scale of operations the vertical transmission of shocks among various levels of the market is an important characteristic describing the overall operation of the market of course price is the primary mechanism by which various levels of the market are linked the extent of adjustment and speed with which shocks are transmitted among producer wholesale and retail market prices is an important factor reflecting the actions of market participants at alternative market levels the nature speed and extent of adjustments to market shocks may also have important implications for marketing margins spreads and mark up pricing practices an extensive literature has examined mar

bayesian estimation of the output gap for a small open economy the case of canada abstract we introduce a novel approach for estimating output gaps for small open economies identification is based on a multivariate trend cycle decomposition in which transitory exchange rate movements are linked to the output gap and inflation the model is then applied to canadian data

the behavior of bid ask spreads in the electronically traded corn futures market this is the first paper to analyze liquidity costs in agricultural futures markets based on the observed bid ask spread bas faced by market participants the results reveal a highly liquid corn market that mostly offers order execution at minimum cost the bas responds negatively to volume and positively to price volatility but also affects volume traded and price volatility while statistically significant these responses on a cents bushel or a percentage basis are generally small liquidity costs are also virtually impervious to short term changes in demand for spreading and trend following trader activity as well as differences from day of the week changes in market activity much larger cents bushel and percentage changes in bas occur during commodity index trader roll periods and on usda report release days the roll period findings indicate a sunshine trading effect while announcement effects identify the importance of unexpected information and adverse selection on order execution costs overall our research demonstrates that the transition to electronic trading in the corn futures market has led to low and stable liquidity costs despite the market turbulence in 2008 2009

spatial dispersion of retail margins evidence from turkish agricultural prices the farmer share of retail prices is shown to be about 16 percent corresponding to about 84 percent of a distribution share on average across agricultural products and regions within turkey the share of transportation costs in retail prices is only about 7 percent while the share of retail margins is about 77 percent of retail prices the dispersion of retail prices across regions is shown to be mostly due to local wages and variable markups while the contribution of traded input prices is relatively small accordingly the high dispersion of farmer prices across locations is not reflected in the dispersion of retail prices due to the high contribution of retail margins these retail margins are also shown to account for about one third of the consumer welfare dispersion across regions and more than half of the consumer welfare dispersion across products

measurement of technological and market structure alternative methodological perspectives discussion all three of the papers in this session lived up to the promise of delivering alternative methodological perspectives but only that of paul and muth and wohlgenant came close to providing a framework for measurement of technological and market structure perhaps a more fitting and inclusive title of the session in light of goodwin and holt s contribution would be technology market structure and price adjustment in the beef marketing channel beef is added because it is on the menu of each of the papers taken together the three papers are timely and important in view of the ongoing changes in market structures and organization of the livestock sector taken individually the degree to which each paper furthers our understanding of those changes varies with the type of issues raised and methodological perspective offered

time consistency of fiscal and monetary policy the problem of time inconsistency arises from two different sources first as shown by guillermo a calvo 1978 the re is an incentive for each government to engage in an initial unanti cipated inflation second as discussed by robert e lucas and nancy l stokey 1983 there is an incentive for each government to deviat e from the path of taxes announced by the preceding government in th is paper it is shown that these two sources of time inconsistency ca n be removed by a particular method of debt management involving bot h nominal and indexed government bonds of various maturities copyright 1987 by the econometric society

spatial price transmission and asymmetry in the ghanaian maize market abstract this paper utilizes recently developed threshold cointegration tests that allow for asymmetric adjustment toward a long run equilibrium relationship to examine price linkages between principal maize markets in ghana unlike previous studies the approach employed here assumes that economic agents only act to move the system back to equilibrium when the deviation from equilibrium exceeds a critical threshold whereby the benefits of this adjustment exceed the costs the findings indicate that major maize markets in ghana are well integrated both the threshold cointegration and asymmetric error correction models reveal that wholesale maize prices in local markets accra and bolgatanga respond more swiftly to increases than to decreases in central market techiman prices accra prices are found to react faster than bolgatanga prices to changes in techiman market prices

the magnitude of menu costs direct evidence from large u s supermarket chains we use store level data to document the exact process of changing prices and to directly measure menu costs at five multistore supermarket chains we show that changing prices in these establishments is a complex process requiring dozens of steps and a nontrivial amount of resources the menu costs average 105 887 year per store comprising 0 70 percent of revenues 35 2 percent of net margins and 0 52 price change these menu costs may be forming a barrier to price changes specifically 1 a supermarket chain facing higher menu costs due to item pricing laws that require a separate price tag on each item changes prices two and one half times less frequently than the other four chains 2 within this chain the prices of products exempt from the law are changed over three times more frequently than the products subject to the law in principle fixed costs of changing prices can be observed and measured in practice such costs take disparate forms in different firms and we have no data on their magnitude so the theory can be tested at best indirectly at worst not at all alan blinder 1991 p 90

the dynamics of markups and inventories in retailing firms this paper is concerned with the interaction between price and inventory decisions in retailing firms and its implications for the dynamics of markups and the existence of sales pro motions we consider a model where a monopolistically competitive retailer decides price and inventories and assumes lump sum costs when placing orders or changing nominal prices tn this model the existence of stockout probabilities and fixed ordering costs generate a cyclical price behaviour characterized by long periods without nominal price changes and short periods with very low prices i e sales promotions we estimate this model using a unique longitudinal dataset with information about retail and wholesale prices inventories orders and sales for several brands in a supermarket chain based on the estimated model we perform several counterfactual experi ments that show the important role that inventories and fixed ordering costs play in the dynamics of retail prices and the frequency of sales promotions in this dataset

multiproduct pricing in oligopoly abstract this paper proposes a two good model of price competition where some consumers visit all shops and others visit only one we find that information frictions lead to price dispersion when the two goods are complements their prices will tend to be negatively correlated so if one is priced high the other will be discounted this finding is supported by some empirical evidence which suggests that simultaneous price discounts of complements are infrequent if the goods are substitutes their prices will be uncorrelated potentially rationalizing the lack of evidence on their co pricing when selling complements retailers earn higher profits than in the one good model through taxing captive consumers with a high overall price tag and attracting shoppers by pricing one of the goods aggressively bundling practices are thus shown to be detrimental to retailers profits

the impact of food scares on price adjustment in the uk beef market abstract this paper considers the impact of food scares predominately concerns relating to bse on uk beef prices at retail wholesale and producer levels over the 1990s acknowledging the co movement that exists between prices in the meat marketing chain we use a co integrating framework the results of which show the importance of publicity regarding the safety of food in the transmission of beef prices in the uk the food publicity index that we use has a marked negative impact on the prices at all levels a result that is consistent with the effect of an inward shift in the demand function moreover the extent of price decline varies between the marketing stages entailing that the price spreads rise in response to an increase in the negative publicity about food safety while not a formal test of market power these observations are consistent with recent theoretical results demonstrating that market power exacerbates price changes in the upstream sectors for a given change in the retail demand function the implication of these varying price changes is that the food safety concerns also cause the marketing margins between the stages to widen the uk s competition commission has recently investigated the abuse of market power in the food sector inspired largely by this specific issue

the timing of sales this paper presents a model of intertemporal price discrimination a fixed number of sellers produce a homogeneous good consumers with different preferences enter the market in each period and leave when they make a purchase the sellers typically vary their prices over time charging a high price in most periods but occasionally cutting the price to sell to a large group of customers with a low reservation price in some equilibria all stores lower their price at the same time and to the same level

nontraded food commodity spatial price transmission evidence from the niger millet market using an augmented factor vector autoregressive favar model this study analyzes spatial millet prices transmission in niger our results did not find condition for millet markets integration existence however the granger causality tests and impulse response functions from the estimated short term dynamic as favar model revealed the existence of leading markets whose millet prices affect a maximum number of other regional millet prices while some regions seem to be isolated from trade or information flows furthermore the significance of a shock depends also on the characteristics of the region where it originates in terms of millet demand or supply indicating that the region to target and where the price shock originated matter for the policies success

multivariate volatility modeling of electricity futures the deregulation of european electricity markets has led to an increasing need in understanding the volatility and correlation structure of electricity prices we model a multivariate futures series of the european energy exchange eex index using an asymmetric garch model for volatilities and augmented dynamic conditional correlation dcc models for correlations in particular we allow for smooth changes in the unconditional volatilities and correlations through a multiplicative component that we estimate non parametrically we also introduce exogenous variables in our new multiplicative dcc model to account for congestion in short term conditional volatilities we find different correlation dynamics for long and short term contracts and the new model achieves higher forecasting performance compared to a standard dcc model

how do retailers price beer during periods of peak demand evidence from game weeks of the german bundesliga this article considers retail beer pricing during game weeks of the german bundesliga german consumers exhibit a high degree of brand loyalty in their preference for regionally crafted beers and we exploit the regional brand loyalty of german beer consumers to identify brand level demand shocks for beers preferred by the home team s fans and visiting team s fans during bundesliga game weeks we find retailer price adjustments at the category level mask a considerably more nuanced pricing behavior at the brand level retailers in regions hosting bundesliga games significantly increase beer prices at the category level during game weeks however at the brand level we find retailers selectively discount prices on the home team s sponsored beers and systematically raise prices on the visiting team s sponsored beers our findings are consistent with a tourist natives model of retail pricing during periods of increased demand in the german beer market

disentangling nonlinearities in the long and short run price relationships an application to the us hog pork supply chain increased concentration at the retail food processing and farm input manufacturing levels has brought increased attention to patterns in retail to farm price spreads most studies documenting asymmetric price transmission focus on nonlinear error correction processes as opposed to the current study which analyses potential nonlinearities in the long run relationship between the farm and retail prices the null hypothesis of nonlinearity in the long run relationship between farm and retail prices in the us hog pork supply chain is rejected in favour of a smooth transition cointegration stc framework the stc framework predicts downward price stickiness in retail prices the predicted residuals of the nonlinear model are used to investigate whether it is possible to disentangle nonlinearity in the long run price relationship from nonlinearity in the adjustment towards the long run equilibrium the results underline the importance of testing for linearity in the long run price relationship before modelli

trend cycle correlation drift break and the estimation of trend and cycle in canadian gdp abstract univariate correlated trend cycle models are highly sensitive to the specifications of breaks in the data this paper argues using monte carlo experiments that a bivariate correlated unobserved components uc framework with breaks delivers substantially more accurate results for the trend cycle parameters than the corresponding univariate frameworks in a finite sample size the paper estimates stochastic trend and cyclical fluctuations in canada from a bivariate uc model results show a fairly volatile stochastic trend after the drift break and the negative trend cycle shock correlation are accounted for the estimated cyclical component is large persistent and consistent with ecri denoted canadian recessions

price transmission and asymmetric adjustment in the spanish dairy sector asymmetric threshold vector error correction models are applied to monthly price data to analyse price relationships and patterns of transmission among farm and retail markets for a variety of dairy products in spain the results suggest that asymmetries affect a conspicuous part of the raw milk processed in spain implications for the organizational structure of spanish dairy markets are offered

the impact of grain self sufficiency regime on regional welfare and agricultural productivity in china the nineties agricultural reforms in china that were aimed at deregulating the agricultural market eventually resulted in a huge drop in agricultural production and a high rate of inflation in agricultural input prices this apparently motivated the government to introduce the grain self sufficiency regime in 1998 we examine how and to what extent this reform affected the productivity and welfare of grain farmers in china at the regional level we find that the price regulations that destroyed the incentive to exert more effort adversely affected the growth in agricultural productivity but contributed to the growth in farmers welfare although the price regulations resulted in short term improvement in welfare across all the regions in the long run such regulations can potentially result in larger drop in agricultural production because of its negative impact on the incentives to produce more

a dynamic equilibrium model of inflation and unemployment a stochastic general equilibrium model is constructed which is capable of examining the covariance properties between inflation and unemployment both conditioned and unconditioned upon the state o

tests of equilibrium macroeconomics using contemporaneous monetary data abstract this paper uses contemporaneous monetary data to carry out econometric tests of the equilibrium approach to modelling the relation between monetary disturbances and macroeconomic fluctuations the theoretical analysis introduces into an equilibrium macroeconomic model the availability of preliminary data on current monetary aggregates and the process of accumulation of revised monetary data the econometric analysis tests two hypothesis derived from this extended model one hypothesis concerns the neutrality of perceived monetary policy the econometric results imply rejection of this hypothesis the other hypothesis concerns the non neutrality of errors in preliminary monetary data the econometric results fail to reject the contrary of this hypothesis these tests provide strong evidence against the reality of the equilibrium approach

price flexibility in channels of distribution evidence from scanner data in this study we empirically examine the extent of price rigidity using a unique store level time series data set consisting of i actual retail transaction prices ii actual wholesale transaction prices which represent both the retailers costs and the prices received by manufacturers and iii a measure of manufacturers costs for 12 goods in two widely used consumer product categories we simultaneously examine the extent of price rigidity for each of the 12 products at both final goods and intermediate goods levels we study two notions of price rigidity employed in the existing literature i the frequency of price changes and ii the response of prices to exogenous cost changes we find that retail prices exhibit remarkable flexibility in terms of both notions of price rigidity i e they change frequently and they seem to respond quickly and fully to cost changes furthermore we find that retail prices respond not just to their direct costs but also to the upstream manufacturers costs which further reinforces the extent of the retail price flexibility at the intermediate goods level of the market in contrast we find relatively more evidence of rigidity in the response of manufacturers prices to cost changes this despite the fact that wholesale prices change frequently and therefore exhibit flexibility according to the first notion of price rigidity

market structure and cost pass through in retail abstract we examine the extent to which vertical and horizontal market structure can together explain incomplete retail pass through to answer this question we use scanner data from a large u s retailer to estimate product level pass through for three vertical structures national brands private label goods not manufactured by the retailer and private label goods manufactured by the retailer our approach circumvents issues associated with internal firm prices and demonstrates that accounting for horizontal market structure is important for measuring the effects of vertical integration and reduced double marginalization on pass through

price dispersion and demand uncertainty evidence from u s scanner data i use the prescott 1975 hotels model to explain variations in price dispersion across items sold by supermarkets in chicago the effect of demand uncertainty on price dispersion is highly significant and quantitatively important my estimates suggest that more than 40 of the cross sectional standard deviation of log prices is due to demand uncertainty i also find that price dispersion measures are negatively correlated with the average price but are not negatively correlated with the revenues from selling the good across stores and weeks and with the number of stores that sell the good temporary sales are modeled as a reaction to unwanted inventories that are accumulated when the realization of demand is low the effect of demand uncertainty on the frequency of temporary sales is also highly significant and quantitatively important items with more demand uncertainty tend to accumulate unwanted inventories more often and tend to have temporary sales more often

how firms construct price changes evidence from restaurant responses to increased minimum wages we use price data underlying the consumer price index to assess how restaurants whose prices are generally quite sticky respond to minimum wage increases aggregate prices rise quickly by amounts reflecting the increase in costs and they rise more among fast food outlets and in low wage locations but restaurants do not construct price increases by raising all their prices by amounts reflecting the increase in wages instead they raise only some prices but by larger amounts prices at cluster points are less likely to be changed and prices that were recently increased decreased are less more likely to be raised

a bayesian model comparison for trend cycle decompositions of output we compare a number of widely used trend cycle decompositions of output in a formal bayesian model comparison exercise this is motivated by the often markedly different results from these decompositions different decompositions have broad implications for the relative importance of real versus nominal shocks in explaining variations in output using us quarterly real gdp we find that the overall best model is an unobserved components model with two features 1 a nonzero correlation between trend and cycle innovations 2 a break in output growth in 2007 under this specification annualized trend output growth decreases from about 3 4 to 1 5 after the break the results also indicate that real shocks are more important than nominal shocks

commodity prices and food inflation commodity prices rose at unprecedented rates between 2007 and 2008 in the year between july 2007 and july 2008 corn prices rose 51 9 soybean prices 74 4 wheat prices 104 5 and milk prices by 41 4 as farm prices reached their peaks policy makers became concerned over the potential impact on retail food price inflation and when farm prices be gan to fall in late 2008 interest shifted to how fast or whether retail prices followed boyle 2009 leibtag 2008 argues that the surge in commodity prices had little impact on con sumer prices because commodity inputs form a small part of the final product although true for some highly processed foods such as break fast cereals cookies and breads farm prices form a significant part of the retail price for fresh produce meat and dairy products in fact pass through rates from farm to retail prices are likely to vary depending on the nature of the production process gardner 1975 the competitiveness of the vertical supply channel bulow and pfleiderer 1983 kim and cotterill 2008 the number of products sold hamil ton 2009 and even the direction of the price change frey and manera 2007 the pass through rate is a simple and important concept but highly complex to measure previous research on this issue assumes

real business cycles in this paper we demonstrate how certain very ordinary economic principles lead maximizing individuals to choose consumption production plans that display many of the characteristics commonly associated with business cycles our explanation is entirely consistent with i rational expectations ii complete current information iii stable preferences iv no technological change v no long lived commodities vi no frictions or adjustment costs vii no government viii no money and ix no serial dependence in the stochastic elements of the environment we also provide a completely worked out example of the type of artificial economy we have in mind the time series properties of the example exhibit some major features of observed business cycles although this type of model may not be capable of explaining all of the regularities in actual business cycles we believe that it provides a useful well defined benchmark for assessing the relative importance of factors e g monetary disturbances

using threshold cointegration to estimate asymmetric price transmission in the swiss pork market this paper employs threshold cointegration tests that allow for asymmetric adjustment towards a long run equilibrium relationship to examine the relationship between producer and retail pork prices in switzerland the short run adjustments are also examined with asymmetric error correction models that are compared to the conventional symmetric error correction models the results indicate that price transmission between the producer and retail levels is asymmetric in the sense that increases in producer prices that lead to declines in marketing margins are passed on more quickly to retail prices than decreases in producer prices that result in increases in the marketing margins

spatial market integration in the presence of threshold effects a large body of research has evaluated price linkages in spatially separate markets much recent research has applied models appropriate for nonstationary data such analyses have been criticized for their ignorance of transactions costs which may inhibit price adjustments and thus affect tests of integration this analysis utilizes threshold autoregression and cointegration models to account for a neutral band representing transactions costs we evaluate daily price linkages among four corn and four soybean markets in north carolina nonlinear impulse response functions are used to investigate dynamic patterns of adjustments to shocks our results confirm the presence of thresholds and indicate strong support for market integration though adjustments following shocks may take many days to be complete in every case the threshold models suggest much faster adjustments in response to deviations from equilibrium than is the case when threshold behavior is ignored a large amount of empirical research has evaluated the extent to which spatially separate markets are integrated though the term is used loosely in the literature tests of market integration usually consider the extent to which shocks are transmitted among spatially separate markets the integration of markets can have important implications for price discovery and the operation of the market since persistent deviations from integration may imply riskless profit opportunities for spatial traders

price transmission asymmetric adjustment and threshold effects in the cotton supply chain a case study for vidarbha india this study examines price transmission asymmetries in vidarbha s india cotton supply chain from 2002 to 2012 the analysis takes account of thresholds in price adjustments toward their long run equilibrium the first stage considers the price dynamics between international and indian domestic cotton prices the second stage considers price transmission from domestic to farm gate cotton prices in vidarbha results from the first stage indicate that indian and international cotton markets are well integrated in contrast the second stage reveals significant threshold type nonlinearities as well as asymmetries in price transmission between domestic and farm gate prices the short run dynamics suggest that the pass through from domestic to farm gate prices is larger when domestic prices decrease than when they increase moreover back of the envelope calculations suggest that the loss in revenue for a typical farmer from a decrease in domestic price is larger than the gains from an increase in domestic price of the same magnitude the implication is that traders benefit from price fluctuations at the expense of farmers evidence from fieldwork in vidarbha suggest that asymmetries revealed in this analysis may be linked to trader s market power and inadequate market information among farmers