multiregional oligopoly with capacity constraints we develop a model of cournot competition between capacity constrained firms that sell a single good to multiple regions we provide a novel characterization for the unique equilibrium allocation o

why has u s inflation become harder to forecast we examine whether the u s rate of price inflation has become harder to forecast and to the extent that it has what changes in the inflation process have made it so the main finding is that the univariate inflation process is well described by an unobserved component trend cycle model with stochastic volatility or equivalently an integrated moving average process with time varying parameters this model explains a variety of recent univariate inflation forecasting puzzles and begins to explain some multivariate inflation forecasting puzzles as well

alternative models of spatial competition the concept of a spatial price equilibrium underlies most studies of spatial movement and competition however this concept is based upon a notion of perfectly competitive markets that is often unrealistic for many markets such as the markets for oil and coal and ignores the existence of local spatial monopolies this paper presents alternative economic models of spatial competition and shows how all of these models can be solved with essentially the same solution algorithm specifically after reformulating the classical spatial price equilibrium model and two extensions of takayama and judge s monopoly model we state and analyze a cournot nash model and discuss solution algorithms we then generalize these models and algorithms to multiple commodities and networks with transshipment nodes we conclude with a brief discussion of possible extensions of this class of models and associated algorithms

efficiency and surplus bounds in cournot competition we derive bounds on the ratios of deadweight loss and consumer surplus to producer surplus under cournot competition to do so we introduce a parameterization of the degree of curvature of market demand using the parallel concepts of concavity and convexity the more concave is demand the larger the share of producer surplus in overall surplus the smaller is consumer surplus relative to producer surplus and the lower the ratio of deadweight loss to producer surplus deadweight loss over total potential surplus is at rst increasing with demand concavity then eventually

estimates of the sticky information phillips curve for the united states mankiw and reis 2002 have proposed a sticky information based phillips curve sipc to address some of the concerns with the sticky price based new keynesian phillips curve in this paper we present a methodology to empirically implement the sipc and estimate its key structural parameter the degree of information stickiness for the united states using this methodology we estimate average durations of information stickiness that range from three quarters on the low side to over seven quarters on the high side

trend inflation and monetary policy regimes in japan abstract this paper examines the dynamics of trend inflation in japan over the last three decades based on the smooth transition phillips curve model we find that there is a strong connection between the trend inflation and monetary policy regimes the results also suggest that the introduction of the inflation targeting policy and quantitative and qualitative easing in the beginning of 2013 successfully escaped from the deflationary regime but were not enough to achieve the 2 inflation target finally our results indicate the significance of exchange rates in explaining the recent fluctuations of inflation and the importance of oil and stock prices in maintaining the positive trend inflation regime

a quantitative comparison of sticky price and sticky information models of price setting i estimate sticky price and sticky information models of price setting for the united states via maximum likelihood techniques reaching several conclusions first the sticky price model fits best and captures inflation dynamics as well as reduced form equations once hybrid behavior is allowed second the importance of hybrid behavior in sticky price models is potentially consistent with a role for some information imperfections such as sticky information as a complement to nominal price rigidities finally the favorable results herein for the hybrid sticky price model when evaluated by statistics that summarize the relative fit of different models is consistent with the existing literature that is both supportive and dismissive of such models as this literature has largely ignored fit in evaluating such models many previous studies have focused on ancillary issues such as the standard errors associated with certain parameters or granger causality tests that may not provide much information about sticky price models

sticky information in general equilibrium this paper develops and analyzes a general equilibrium model with sticky information the only rigidity in goods labor and financial markets is that agents are inattentive sporadically updating their information sets when setting prices wages and consumption after presenting the ingredients of such a model the paper develops an algorithm to solve this class of models and uses it to study the model s dynamic properties it then estimates the parameters of the model using u s data on five key macroeconomic time series it finds that information stickiness is present in all markets and is especially pronounced for consumers and workers variance decompositions show that monetary policy and aggregate demand shocks account for most of the variance of inflation output and hours jel e30 e10

a naive sticky information model of households inflation expectations this paper provides a simple epidemiology model where households when forming their inflation expectations rationally adopt the past release of inflation with certain probability rather than the forward looking newspaper forecast as suggested in carroll 2003 macroeconomic expectations of households and professional forecasters quarterly journal of economics 118 269 298 the posterior model probabilities based on the michigan survey data strongly support the proposed model we also extend the agent based epidemiology model by deriving for it a simple adaptation which is suitable for estimation our results show that this model is able to capture the heterogeneity in households expectations very well

existence and uniqueness of cournot equilibrium a contraction mapping approach abstract we provide a new proof of existence and uniqueness of a cournot equilibrium the contraction mapping approach is used equilibrium is characterized in terms of marginal costs the result is useful for applications to two stage games

expectations heterogeneous forecast errors and consumption micro evidence from the michigan consumer sentiment surveys the household data underlying the michigan index of consumer sentiment are used to test the rationality of consumer expectations and their usefulness in forecasting expenditure the results can be interpreted as characterizing the shocks that hit different types of households over time expectations are found to be biased and inefficient at least ex post people underestimated the disinflation of the early 1980s and the severity of recent business cycles people s forecast errors are also systematically correlated with their demographic characteristics in part because of time varying group level shocks further sentiment helps forecast consumption growth some of this rejection of the permanent income hypothesis is due to the systematic demographic components in forecast errors

labour on the family farm a theory under uncertainty an extension abstract in a framework developed by p j dawson the effects of output price risk on the family labour supply and its demand for hired labour are investigated in particular the effects of changes in autonomous income expected output price family composition and farm size are studied comparative statics is used to sign these effects revealing the importance of the behavior of the measures of absolute relative and partial risk aversion in determining them it is shown that some of the effects may be determined only via empirical research

a note on the effect of cost changes on prices in a recent article in this journal sumner 1981 took an ingenious approach to estimating the level of monopoly power in the cigarette industry he noted that differences in marginal costs exist in the industry due to varying levels of state taxes the sales prices established will satisfy the equation p i liq l mr mc where p price and q the elasticity of demand for the product in question if elasticity is a constant observing the change in marginal cost and the change in price enables one to infer the elasticity of demand perceived by the firm elasticity could then be used as a proxy for the firm s market power this technique turns out to be of very limited applicability however because it is extremely sensitive to the functional form assumed for the demand curve consider the general problem of a firm facing constant marginal costs of c in maximizing profits the firm solves

labour on the family farm a theory under uncertainty abstract this paper develops a theory of the family farm in conditions of uncertainty where attention is focussed on the labour input decisions specifically the farm family is faced with two labour decisions namely with respect to hired labour and to family labour the framework for analysis is expected utility maximisation the analysis has implications for agricultural policy since policy pronouncements of economists are typically based on models which assume perfect certainty these pronouncements do not survive the incorporation of uncertainty

collusive conduct in duopolies multimarket contact and cross ownership in the mobile telephone industry the deregulation of the telecommunications industry has resulted in a variety of industry structures which have been created in hopes of increasing competition one example is the licensing of cellular telephone services in the united states where the fcc created duopolies in which two firms were granted licenses to compete in strictly defined product and geographic markets taking advantage of the unique regulatory environment we test to what degree duopolistic competition leads to competitive market outcomes we find that cross ownership and multimarket contact are important factors in explaining non competitive prices

macroeconomic expectations of households and professional forecasters economists have long emphasized the importance of expectations in determining macroeconomic outcomes yet there has been almost no recent effort to model actual empirical expectations data instead m acroeconomists usually simply assume that expectations are rational this paper shows that while empirical household expectations are not rational in the usual sense expectational dynamics are well captured by a model in which households views derive from news reports of the views of professional forecasters which in turn may be rational the model s estimates imply that people only occasionally pay attention to news reports this inattention generates stickyness in aggregate expectations with important macroeconomic consequences

competition in a multimarket environment the case of market exit studies of competition typically have two underlying assumptions that competition occurs within the boundaries of industries or markets and that all firms in a market or industry are affected equally by competitive pressures the concept of multipoint competition challenges both assumptions multipoint theory addresses how different levels of contact between firms across multiple markets affect competition in individual markets its main argument is that high levels of contact between firms across markets will induce mutual forbearance causing multipoint competitors to refrain from aggressively attacking each other the restraint stems from the fact that high levels of intermarket contact enable a firm to respond to an aggressive action by a multipoint rival in markets other than the one in which the action takes place that possibility raises the potential costs of aggressive moves and serves as a credible deterrent especially if a firm can respond in several markets in addition multipoint competiti

accounting for incomplete pass through recent theoretical work has suggested a number of potentially important factors in causing incomplete pass through of exchange rates to prices including markup adjustment local costs and barriers to price adjustment we empirically analyze the determinants of incomplete passthrough in the coee industry the observed pass through in this industry replicates key features of pass through documented in aggregate data prices respond sluggishly and incompletely to changes in costs we use microdata on sales and prices to uncover the role of markup adjustment local costs and barriers to price adjustment in determining incomplete pass through using a structural oligopoly model that nests all three potential factors the implied pricing model explains the main dynamic features of short and long run pass through local costs reduce long run pass through by a factor of 59 relative to a ces benchmark markup adjustment reduces pass through by an additional factor of 33 where the extent of markup adjustment depends on the estimated super elasticity of demand the estimated menu costs are small 0 23 of revenue and have a negligible eect on long run pass through but are quantitatively successful in explaining the delayed response of prices to costs we nd that delayed passthrough in the coee industry occurs almost entirely at the wholesale rather than the retail level

new tests of the new keynesian phillips curve abstract lagged dependent variables typically play an important role in empirical models of inflation do these lags reflect backward looking inflation expectations or do they proxy for rational forward looking expectations as in the new keynesian phillips curve gali and gertler 1999 inflation dynamics a structural econometric analysis journal of monetary economics 44 195 222 attempt to answer this question using gmm to estimate specifications incorporating both lagged and future inflation they report small coefficients on lagged inflation and conclude that the new keynesian model provides a good first approximation to inflation dynamics we show that these tests have low power against alternative backward looking specifications and demonstrate that their results are also consistent with a backward looking phillips curve using an alternative approach we find that the new keynesian pricing model cannot explain the importance of lagged inflation in standard inflation regressions and find that forward looking terms play a very limited role in explaining inflation dynamics

cournot competition in networked markets the paper considers a model of competition among firms that produce a homogeneous good in a networked environment a bipartite graph determines which subset of markets a firm can supply to firms c

compensated optimal response under uncertainty in agricultural household models abstract this study derives the qualitative properties of a household s optimal consumption family labour hired labour and non labour input choices under price and or output risk through a slutsky type compensation without imposing any restriction on risk preference structure or production technology these compensated responses provide the underpinning for welfare analysis in agricultural household models under risk the framework for the evaluation of welfare effects of product and factor price interventions in a setting of output and price risk is developed the paper also outlines an empirical model for estimation of the compensated demand and supply responses and for validation of the paper s analytical results

living by the golden rule multimarket contact in the u s airline industry this paper examines empirically the effects of multimarket contact on pricing in the u s airline industry the analysis of the time series and cross sectional variability of airline fares in the 1000 largest domestic city pair routes reveals the presence of statistically significant and quantitatively important multimarket effects fares are higher in city pair markets served by carriers with extensive interroute contacts these findings are consistent with the claims of industry experts that airlines live by the golden rule i e that they refrain from initiating aggressive pricing actions in a given route for fear of what their competitors might do in other jointly contested routes during his testimony mr steven b elkins senior director of marketing systems development for northwest airlines cited an example in which northwest lowered fares on night flights that were flying with empty seats in a number of routes from minneapolis and upper midwest cities to various west coast cities he said that continental airlines swiftly responded by cutting prices in important northwest markets mr elkins s memo advises northwest pricing analysts we will live by the golden rule in his testimony he explained that the golden rule in that context was that i did not want my pricing analyst initiating actions in another carrier s market like chicago for fear of what that other carrier might do to retaliate wall street journal october 9 1990 p b1

sticky information and model uncertainty in survey data on inflation expectations abstract this paper compares three reduced form models of heterogeneity in survey inflation expectations on the one hand we specify two models of forecasting inflation based on limited information flows of the type developed in mankiw and reis 2002 sticky information versus sticky prices a proposal to replace the new keynesian phillips curve quarterly journal of economics 117 4 1295 1328 we present maximum likelihood results that suggests a sticky information model with a time varying distribution structure is consistent with the michigan survey of inflation expectations we also compare these sticky information models to the endogenous model uncertainty approach in branch 2004 the theory of rationally heterogeneous expectations evidence from survey data on inflation expectations economic journal 114 497 non parametric evidence suggests that models which allow the degree of heterogeneity to change over time provide a better fit of the data

macroeconomic forecasting using diffusion indexes this article studies forecasting a macroeconomic time series variable using a large number of predictors the predictors are summarized using a small number of indexes constructed by principal component analysis an approximate dynamic factor model serves as the statistical framework for the estimation of the indexes and construction of the forecasts the method is used to construct 6 12 and 24 monthahead forecasts for eight monthly u s macroeconomic time series using 215 predictors in simulated real time from 1970 through 1998 during this sample period these new forecasts outperformed univariate autoregressions small vector autoregressions and leading indicator models