an empirical exploration of the world oil price under the target zone model abstract this paper investigates the behavior of the world oil price based on the first generation target zone model using anecdotal data during the period of 1988 1999 we found that opec has tried to maintain a weak target zone regime for the oil price our econometric tests suggest that the movement of the oil price is not only manipulated by actual and substantial interventions by opec but also tempered by market participants expectations of interventions as a consequence the non linear model based on the target zone theory has very good forecasting ability when the oil price approaches the upper or lower limit of the band

the pricing of protected areas in nature based tourism a local perspective abstract this paper extends the literature on optimal pricing of recreation in protected areas by introducing price discrimination between groups of visitors and given that the agency charges different prices to subsets of visitors by including a distributional dimension that is particularly relevant for a national park agency receiving visitors from different origins other issues related to optimal entrance fees including negative ecological impacts and positive spillover effects on local communities resulting from changes in visitation are also discussed based on this model the paper provides an estimation of optimal entrance fees and revenues for the costa rican system of protected areas

combining cartel penalties and private damage actions the impact on cartel prices abstract in many countries antitrust enforcement by competition authorities through prosecution and the imposition of penalties is complemented in price fixing cases by private damage actions which should affect both cartel deterrence and the prices set by those cartels that do form we show that the impact of combining penalties and damages on cartel prices is not clearcut and depends on both the nature of the penalty regime and the way that damages are calculated we demonstrate this by focusing on two ways of calculating damages that have been advocated in practice and two different forms of the widely used revenue based penalty regime when the simple form of revenue based penalties is in force the standard method of calculating damages worsens its harmful pricing effects whereas the proposed alternative method of calculating damages can overturn them when a more sophisticated form of revenue based penalties is in operation imposing damages will improve its beneficial pricing effects under both methods of damage calculation but the alternative method is more effective in all cases combining penalties and damages improves deterrence

competition policy and cartel size this article examines endogenous cartel formation in the presence of a competition authority competition policy is shown to make the most inclusive stable cartels less inclusive in particular small firms that might have been cartel members in the absence of a competition authority are no longer members regarding the least inclusive stable cartels competition policy can either decrease or increase their size and in the latter case the collusive price can rise

a model of the crude oil market in which market conduct varies this paper describes a model which first identifies in an estimatable manner parameters which describe the conduct each decision maker in an oligopoly expects from it s rivals and then allows them to vary in a systematic fashion across rivals and over time the model is applied to ten producing countries in the crude oil market 1966i to 1981iii a fully dynamic demand system is estimated together with equations describing price choice and variations in conduct and the null hypothesis of constant conduct is rejected against the more general alternative proposed here copyright 1987 by royal economic society

market structure and the pricing of electricity and natural gas us electricity and natural gas markets have traditionally been serviced by one of two market structures in some markets electricity and natural gas are sold by a regulated dual product monopolist while in other markets electricity and natural gas are sold by separate regulated single product monopolies i analyze whether electricity and natural gas prices depend on the market structure and compare these results to the predictions of a number of theories the results are most consistent with the political economy theories suggesting that regulators respond to interest group activity

target zones and exchange rate dynamics this paper develops a simple model of exchange rate behavior under a target zone regime it shows that the expectation that monetary policy will be adjusted to limit exchange rate variation affects exchange rate behavior even when the exchange rate lies inside the zone and is thus not being defended actively somewhat surprisingly the analysis of target zones turns out to have a strong formal similarity to problems in option pricing and investment under uncertainty

endogenous cartel formation with heterogeneous firms in the context of an infinitely repeated capacity constrained price game we endogenize the composition of a cartel when firms are heterogeneous in their capacities when firms are sufficiently patient there exists a stable cartel involving the largest firms a firm with sufficiently small capacity is not a member of any stable cartel when a cartel is not all inclusive colluding firms set a price that serves as an umbrella with non cartel members pricing below it and producing at capacity contrary to previous work our results suggest that the most severe coordinated effects may come from mergers involving moderate sized firms rather than the largest or smallest firms

stock price clustering and discreteness stock prices cluster on round fractions clustering increases with price level and volatility and decreases with capitalization and transaction frequency clustering is pervasive price clustering will occur if traders use discrete price sets to simplify their negotiations exchange regulations require that most stocks be traded on eighths clustering on larger fractions will occur if traders choose to use discrete price sets based on quarters halves or whole numbers an econometric model of clustering is derived and estimated projections from the results suggest that traders would frequently use odd sixteenths when trading low price stocks if exchange regulations permitted trading on sixteenths article published by oxford university press on behalf of the society for financial studies in its journal the review of financial studies

a test of the opec cartel hypothesis 1974 1983 this paper tests whether the higher oil prices fo the last decade could have been the result of producer collusion we find little evidence that opec influenced oil prices during the years of skyrocketing prices 1974 1980 but there is evidence that it did so during the recent years of softening prices 1981 1983

price clustering in bitcoin investor and media attention in bitcoin has increased substantially in recently years reflected by the incredible surge in news articles and considerable rise in the price of bitcoin given the increased attention there little is known about the behaviour of bitcoin prices and therefore we add to the literature by studying price clustering we find significant evidence of clustering at round numbers with over 10 of prices ending with 00 decimals compared to other variations but there is no significant pattern of returns after the round number we also support the negotiation hypothesis of harris 1991 by showing that price and volume have a significant positive relationship with price clustering at whole numbers

optimal cartel pricing in the presence of an antitrust authority the dynamic behavior of a price fixing cartel is explored when it is concerned about creating suspicions that a cartel has formed consistent with preceding static theories the cartel s steady state price is decreasing in the damage multiple and the probability of detection however contrary to those theories it is independent of the level of fixed fines it is also shown that the cartel prices higher when a more competitive benchmark price is used in calculating damages

exploration information and aec regulation of the domestic uranium industry abstract for roughly twenty years following the second world war the atomic energy commission was the only purchaser of domestically produced uranium such monopsony power implicitly allowed the atomic energy commission s to regulate the u s uranium industry this paper investigates the atomic energy commission s implicit regulation asking if an efficient allocation of resources was induced the main finding is that undesirably high levels of exploration were induced

bank deposit rate clustering theory and empirical evidence the market prices of stocks and other assets tend to cluster on round fractions a similar clustering is found in the interest rates paid on retail bank deposits however the theoretical rationales given for asset price clustering are incompatible with the clustering of retail deposit rates this paper proposes a theory based on depositors limited recall it shows that when banks exploit this phenomenon deposit rates will tend to be set at round fractions and will be relatively sticky at these levels the implications of this theoretical model are tested using money market deposit account and retail certificate of deposit interest rate data from a sample of more than 500 banks

a geopolitical theory of oil price behaviour an econometric evaluation previous work on crude oil price modelling has generally focused on two theoretical approaches either the optimal control analysis of pricing of a depletable resource or organization of the petroleum exporting countries opec as a partial monopolist setting oil prices to maximize net present value neither has been wholly satisfactory we consider a different perspective a cooperative framework in which political and military factors interacted with economic considerations for oil exporters and importers to define a target price zone tpz we analyse several issues in this context monthly versus annual average prices beginning and ending dates for tpzs degree of stability in several price series west texas intermediate wti brent etc free on board fob and landed prices real or nominal prices opec behaviour and effect of the euro exchange rate on dollar denominated oil prices we conclude that a tpz system was in operation from 1986 through 2003 the tpz worked imperfectly but with a sub

the equity and efficiency of runway pricing abstract this paper poses and answers the following question if an airport authority is assumed to choose landing fees that maximize a weighted sum of airline consumers surpluses subject to a revenue requirement what set of weights is implied by currently observed fees the model is loosely applied to san francisco international airport the main result is that commuter airlines are much more favored than others

regulator preferences and utility prices evidence from natural gas distribution utilities abstract we investigate the determinants of regulators relative weighting of the social welfare of customer groups and utilities using panel data on natural gas distribution utilities in the us state of tennessee in contrast to previous empirical work on cross sections of electric utilities our results are statistically robust and consistent with the interest group theory of regulation intervention in rate cases settlement vs litigation of cases and prices of alternative energy sources as well as the size characteristics of customer groups and the firm are significant determinants of the elasticity weighted price cost margin ramsey number for each group

price barriers in the dow jones industrial average this study tests the popular claim that the djia s movements around key reference points affect investor sentiment and thus price behavior it is found that the djia s rise and fall is indeed restrained by support and resistance levels at multiples of 100 e g 2800 2900 3000 etc but that having broken through a 100 level the djia then moves by more than otherwise warranted a monte carlo study and comparisons with other indices confirm the significance of these findings this suggests that some agents may trade on the basis of the djia but does not necessarily suggest that the market is inefficient

opec behavior a test of alternative hypotheses since interpretations of past and future oil price patterns depends on the model chosen the author tests and compares alternative theories of opec as a first step in validating the choice on any one model the results show that among opec countries the partial market sharing cartel model is the only model not rejected by at least some of the 11 members and gives the best explanation of production in comparison with 11 non opec countries the competitive model could not be rejected for 10 of the 11 non opec producers this raises the question of why if opec is a cartel friedman s predictions have not come true and introduces new questions for future research 19 references 3 tables

clustering in crude oil prices and the target pricing zone hypothesis abstract this paper studies the target pricing zone tpz hypothesis for crude oil by examining price clustering in the dollar digit it is hypothesized that price clustering occurs within an established tpz if opec is able to defend the upper and lower bounds through output changes the results show that prices strongly cluster around the dollar digit value of 9 within the tpz sub periods but not outside the sub periods furthermore the degree of clustering declines when production capacity utilization is high and when production significantly exceeds quotas consistent with opec s inability to defend the zone nine centered clustering also results in lower contemporaneous and next day volatility these results support the target pricing zone hypothesis of crude oil

do investors prefer round stock prices evidence from israeli ipo auctions abstract we find round number clustering in orders submitted by investors in israeli ipo auctions explanations offered for price clustering such as dealer collusion or implicit agreement to simplify negotiations cannot explain price clustering in this market therefore this is direct evidence that investors prefer round numbers

multiple output production and pricing in electric utilities empirical studies of the electric utility industry have generally focused on one of several issues such as the presence or absence of regulation induced input mix distortions the rules used to select regulated prices whether electricity is one output or several or the naturalness of the electric utility monopoly this paper contributes a method which permits simultaneous estimation of demand elasticities pricing rule parameters and marginal rates of transformation within one econometric model since firms make input and output decisions given the demand and regulatory conditions facing them the marginal rates of substitution and transformation are dependent on the demand elasticities of each consumer class and the prices permitted by regulators its purposes are two first i examine the appropriateness of a multiple output model of production is electricity one output or are the products sold to different consumers distinct outputs most but not all previous studies treat electricity as a homogeneous product 2 while this assumption may be justified for studies which deal strictly with generation of electricity joskow and schmalensee 27 54 5 observe3 that

oil production responses to price changes an empirical application of the competitive model to opec and non opec countries abstract falling oil prices over the last decade accompanied by over production by some opec members and the growth of non opec supply warrant further empirical investigation of the competitive model to ascertain production behavior a supply function based on a modification of griffin s model is estimated using data from 1973 1997 the sample period unlike griffin s however includes phases of price increase 1970s and price decrease 1980s 1990s thus providing a better framework for examining production behavior using the competitive model the opec results do not support the competitive hypothesis instead a negative and significant price elasticity of supply is obtained this result offers partial support for the target revenue theory for most of the non opec members the estimates support the competitive model opec s loss of market share and the drop in the share of oil based energy should signal adjustments in price and quantity based on a competitive world market for crude oil

tick size bid ask spreads and market structure we propose a link between market structure and the resulting market characteristics tick size bid ask spreads quote clustering and market depth we analyze transactions data of stocks traded on the london stock exchange a dealer market we conclude that market charateristics are endogenous to the market structure the london dealer market does not have a mandated tick size and it exhibits higher spreads higher quote clusterings and higher market depth than the nyse auction market clustering of trade prices is similar in london and new york

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

the theory of state owned enterprises in market economies abstract four topics are covered the circumstances under which state owned enterprises soes are more effective than private firms the different approaches to modelling public and private firms the performance of soes and strategies including privatization to limit their more damaging effects it is argued that ideological or development motives are important in their genesis but that if efficiency and innovation are key considerations the normative case for their existence is more doubtful various types of soe model are identified deriving from the variety of circumstances in which they operate and the theoretical perspective of the modeller these include the property rights school the public choice tradition neoclassical behavioural and budget maximizing approaches all models assume the existence of monitoring problems created by informational asymmetry the consequences can include high non pecuniary benefits for managers a concentration on monitored activities and lower innovation levels and efficiency than private firms curiously this is not necessarily reflected in higher prices or costs possible remedial strategies include a change of ownership a change of objectives the introduction of incentive compatible payment schemes improved performance indicators and privatization

implications of the discreteness of observed stock prices stock prices on the organized exchanges are restricted to be divisible by 1 8 therefore the true price usually differs from the observed price this paper examines the biases resulting from the discreteness of observed stock prices it is shown that the natural estimators of the variance and all of the higher order moments of the rate of returns are biased an approximate set of correction factors is derived and a procedure is outlined to show how the correction can be made the natural estimators of the beta and of the variance of the market portfolio on the other hand are nearly unbiased the behavior of stock prices has been an issue of interest to the financial economist for many years this interest resulted in a growing number of empirical studies which attempt to estimate this behavior e g blattberg and gonedes 2 fama 6 fama and roll 7 8 barnea and downes 1 to date stock price behavior is estimated under the assumption that the observed trading price is the true equilibrium price however observed stock prices and stock price changes on the organized exchanges are restricted to multiples of 1 8 of a dollar 1 therefore if the true distribution of stock prices is continuous an observed trading price can be different from the true price this paper examines the biases in estimating the moments of stock price changes caused by the discreteness of observed stock prices the major focus of the paper is in noting this problem providing a model which explains the source of these biases and quantifying their size section i demonstrates that due to the discrete nature of observed stock prices the natural estimators for the variance and for the higher order moments of the rate of returns are biased upward this bias is larger for stocks with lower prices and smaller standard deviation for instance assuming that the standard deviation a is 0 001 the stock price is one dollar the true probability distribution of stock prices is lognormal and the observed prices are as close as possible to the true prices then the natural estimator of r has expectation 0 01400 hence it is biased upward by 1300 significant biases have important implications in option pricing we derive an approximate set of correction factors which can be applied to the

the market power of opec 1973 2001 we apply a multi equation dynamic econometric model on monthly data to test if the behaviour of opec as a whole or different sub groups of the cartel is consistent with the characteristics of dominant producers on the world crude oil market in the period 1973 2001 our results indicate that the producers outside opec can be described as competitive producers taking the oil price as given and maximizing profits the opec members do not fit the behaviour of price taking producers our findings of low residual demand price elasticities for opec underpin the potential market power of the producer group and are in line with the results in some recent energy studies on the other hand our findings indicate that neither opec nor different sub groups of the cartel can be characterized as a dominant producer in the period 1973 1994 however we find that the characteristics of a dominant producer to some extent fit opec core as from 1994 thus although opec clearly has affected the market price the producer g

testing the hypothesis of collusive behavior among opec members abstract this paper presents a test to discriminate among collusive and competitive behavior by producers of exhaustible resources in contrast to previous studies griffin 1985 jones 1990 which are based on static models our approach is based on of the dynamic implications of the optimization problem faced by a competitive producer we use this framework to test the hypothesis of collusive behavior within opec between 1983 and 1991 the existence of future markets allows us to sidestep the difficult issues related to the estimation of future prices and demand

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

opec and other commodity cartels a comparison abstract the economic literature provides specific characteristics for cartels although the theory of international cartels is not well developed in the literature and every cartel is unique some of these characteristics exist in each cartel this study investigates the existence of these characteristics in six known commodity cartels including opec in addition it compares the oil companies cartel the seven sisters to opec and summarizes the findings of opec econometric models developed in the literature in the last 25 years and concludes that the results do not support cartel or competitive models for opec although other cartels are more successful than opec many books and articles in economics use opec as a cartel example neither statistical tests nor theory support the popular use of opec as a cartel example indeed this article concludes that opec is composed of saudi arabia the dominant world producer plus several distinct sub groups and that separate models are required to explain the behavior of each assigning the power of some opec members to opec has caused confusion about its behavior recent opec success is attributed to political natural and technical capacity limitations in the oil fields that prevented countries from cheating on their quota in other words opec adherence to the quota except for saudi arabia is anything but voluntary

patterns of rightmost digits used in advertised prices implications for nine ending effects analysis of the rightmost digits of selling prices in a sample of retail price advertisements confirmed past findings indicating the overrepresentation of the digits 0 5 and 9 the high cognitive accessibility of round numbers can account for the overrepresentation of 0 and 5 ending prices and suggests the existence of two effects that could account for the overrepresentation of 9 ending prices 1 a tendency of consumers to perceive a 9 ending price as a round number price with a small amount given back and 2 a tendency of consumers to underestimate a 9 ending price by encoding it as the first round number evoked during incomplete left to right processing analysis of the patterns of rightmost digits observed in the sample provides supportive evidence particularly for the second of these two 9 ending effects

world crude oil and natural gas a demand and supply model abstract this paper examines world markets for crude oil and natural gas over the period 1918 1999 it analyzes the time series properties of output and prices and estimates demand and supply elasticities during 1918 1973 and 1973 1999 oil and gas prices were stable during the first period they became volatile afterwards reflecting deep changes in the market structure following the oil shock in 1973 demand price elasticities were too low however demand income elasticities were high supply price elasticities were also too low the elasticity estimates help to explain the market power of the oil producers and price volatility in response to shocks and corroborate elasticity estimates in energy studies

uncovering regulators social welfare weights this article describes a procedure that can be used to infer interesting information about the preferences of regulators from the pricing decisions they make this is done by using an adaptation of the familiar ramsey pricing model which allows benefits derived from the consumption of different goods or derived by different consumers to carry different social weights these weights are then exposed by inverting the first order conditions of the constrained maximum problem

optimal departures from marginal cost pricing focuses on departures from marginal cost pricing optimal allocation or resources level of tax revenue that will be collected by the government theorems developed for resource allocation ebsco

optimal corporate leniency programs this study characterizes the corporate leniency policy that minimizes the frequency with which collusion occurs though it can be optimal to provide only partial leniency plausible sufficient conditions are provided whereby the antitrust authority should waive all penalties for the first firm to come forward it is also shown that restrictions should be placed on when amnesty is awarded though it can be optimal to award amnesty even when the antitrust authority is very likely to win the case without insider testimony