exchange rate adjustment and oligopoly pricing behaviour this paper sets out a general theoretical structure for analyzing price adjustments to cost changes within asymmetric oligopolistic markets the theory implies that contrary to the usual assumption exchange rate changes may leave prices unaltered this is explored by an empirical examination of the european car market intracountry changes in car prices and the huge differences in u k and european car prices are both examined the empirical results are in line with the theoretical implications changes in relative supply costs are more likely to be converted into changes in price cost margins than prices within a national oligopolistic market copyright 1989 by oxford university press

urban spatial structure urban structure is increasingly characterized by decentralization dispersion and multiple employment centers much is known empirically about such patterns and about how the interplay between agglomerative and dispersive forces generates spatial structures that are complex and prone to multiple equilibria and dynamic path dependence these forces operate at different spatial scales many entail unpriced interaction and external scale economies deriving from product differentiation and endogenous technical change appear particularly important because these forces interact in complex ways inefficiencies in urban structure are resistant to simple policy interventions

informative advertising and optimal targeting in a monopoly this paper analyzes how the transition from mass to specialized advertising can affect the market outcomes to that end we consider a particular technology of information transmission which allows a monopolist to decide the optimal targeting strategy from this starting point we show that the use of targeted advertising is likely to increase the market price and reduce the level of advertising and that the degree of media specialization chosen by the monopolist tends to exceed the socially optimal furthermore our model indicates that the social loss resulting from the greater monopoly power might exceed the gain due to the lower wasting of ads in such a way that targeting could reduce consumer surplus and what is more important the level of social welfare

exchange rate pass through in developing and emerging markets a survey of conceptual methodological and policy issues and selected empirical findings abstractglobal integration has increased the international linkages of financial markets for emerging market countries a key channel for the international transmission of inflation and economic cycles is from exchange rate movements to domestic prices known as exchange rate pass through erpt this article reviews the conceptual methodological and policy issues connected with erpt in emerging market and developing countries and critically surveys selected empirical studies a key contribution is to categorise and compare the heterogeneous methodologies used to extract erpt measures in the empirical literature single equation models and systems methods are contrasted frequent misspecifications that produce unreliable erpt estimates are highlighted the discerning policy maker needs to ascertain by which methods erpt measures were calculated the controls and restrictions applied and the time frame and stability of the estimates

land use and density in cities with congestion abstract it was well documented that monocentric spatial models with congestion require driving tolls to generate market efficiency because driving and location are equivalent tolling congestion is the same as regulating density this paper shows that internalizing the congestion externality always requires upward adjustments to market density which are greatest at the urban center this holds whether or not transportation capacity is optimally provided simulations suggest optimal cities should have central densities that are orders of magnitude greater than market cities

the interaction of foreign exchange and market power effects on german domestic prices this paper illustrates the importance of international influences on domestic markets a model is presented in which changes in a country s terms of trade pass through to industrial prices in varying degrees depending on import penetration and seller concentration empirical results suggest that the 8 4 percent decline in the real external value of the deutsche mark from 1977 to 1983 allowed upward movement of about 2 percent in domestic producer prices of traded goods relative to the gnp price deflator increased market concentration led to a reduced effect while increased import penetration led to some increase in the exchange rate passthrough standard industrial organization models stress the impact of market power and entry conditions on economic performance with particular interest in price effects at the industry level greater concentration is expected to lead to higher prices ceteris paribus while greater ease in entry or a larger competitive fringe implies lower prices the international economics literature indicates that in the absence of trade barriers transactions and transportation costs and market power foreign exchange rate changes will be fully passed through to import and export prices implying that domestic prices of traded goods for an appreciating currency will be adjusted downward by the full amount of the exchange rate change the dramatic changes in exchange rates since the early 1970s provided exporters with new opportunities to enter markets of nations that had a strong currency west germany has been regarded as one such country this paper investigates the effect of exchange rate movements on particular german industrial prices i test to see whether the prominence of imports

bottleneck congestion and residential location of heterogeneous commuters this study examines the effects of bottleneck congestion and an optimal time varying congestion toll on the spatial structure of cities we develop a model in which heterogeneous commuters choose departure times from home and residential locations in a monocentric city with a bottleneck located between a central downtown and an adjacent suburb we then demonstrate that commuters sort themselves temporally and spatially on the basis of their value of travel time and their flexibility furthermore we reveal that introducing an optimal congestion toll alters the urban spatial structure which contrasts with the previous literature we further demonstrate through an example that congestion tolling can cause the city to physically expand outward which helps rich commuters but hurts poor commuters

symmetric pass through of tariffs and exchange rates under imperfect competition an empirical test abstract this paper examines the effect of tariffs and exchange rates on u s prices of japanese cars trucks and motorcycles in particular we test whether the long run pass through of tariffs and exchange rates are identical the symmetry hypothesis we find that this hypothesis is easily accepted in our sample we also find that the pass through relation varies across products ranging from about 0 6 for trucks to unity for motorcycles these coefficients have very different implications for trade policy we explain the results based on demand cost and institutional conditions in each industry

external adjustments and exchange rate flexibility some evidence from u s data this paper examines the role of the exchange rate in u s external adjustments the results show that the exchange rate is an important transmission channel of influence on prices and with longer lags on income and the trade balance the effects of the exchange rate and relative prices on the trade balance are not symmetric even in the long run exchange rate feedback is insignificant and makes little difference in trade balance adjustment there are also indications that the response of relative prices to the exchange rate shifted in recent years such changes seem to help explain the persistence of the u s trade deficit in recent years for multilateral trade but not bilateral trade with japan or germany copyright 1991 by mit press

the effects of foreign exchange movements on u s domestic prices this paper draws on the fields of international economics and industrial organization to model and empirically examine the relationship between currency value fluctuations and domestic producer prices the major focus is the issue of whether and why domestic industries differ systematically in their response to exchange rate changes the major findings are that changes in the external value of the u s dollar between 1974 and 1987 passed most fully into domestic prices of industries heavily reliant on imported inports and producing goods highly substitutable for imports highly capital intensive and concentrated industries and those protected by extensive barriers to entry both from domestic and foreign sources have exhibited less domestic price change from the exchange rate movements copyright 1989 by mit press

price discrimination by u s and german exporters the insensitivity of the u s trade balance to the sharp depreciation of the dollar in the past three years has revived interest in the relationship between exchange rates and the trade balance a central issue in most analyses of the relation between the current account and the exchange rate concerns the price adjustment process the simple integrated competitive market model predicts that local currency prices should change in proportion to the nominal exchange rate for a country too small to influence world prices the relationship between local currency import prices and exchange rates has been referred to as the pass through relationship in the empirical literature in international economics if the proportional relationship between import prices and exchange rates holds pass through is said to be complete accounts of recent u s experience cite the failure of dollar prices of imported goods to rise in proportion to exchange rates i e incomplete pass through as an important factor in explaining the persistence of the trade deficit unfortunately observations on pass through alone provide limited insight into the behavior of markets since incomplete pass through is consistent with at least two fundamentally different paradigms one is the standard competitive model of trade in which the law of one price holds but exchange rate fluctuations are associated with large changes in import demand due to other factors for example if dollar appreciation is correlated with increases in world demand and industry marginal cost is increasing then pass through will be less than complete the other is an imperfectly competitive model in which exporters are capable of price discriminating across destination markets a phenomenon paul krugman 1987 has labeled pricing to market in this model incomplete pass through is typically associated with fluctuations in the markup of price over marginal cost on exports 2 these fluctuations in markups are believed to be countryspecific they do not reflect the behavior of prices to other export destinations both models are plausible explanations of recent u s experience unfortunately it is impossible to distinguish between these competing models using only information on import prices and exchange rates for a single country in order to distinguish between the competing models an empirical analysis of goods prices and exchange rates must be capable of measuring either marginal cost or the markup over marginal cost either of these tasks poses formidable empirical problems much of the empirical literature in industrial organization has been concerned with precisely these issues since markups are an important measure of the competitiveness of industries

the structuralist theory of imported inflation an application to south africa this study emphasizes the importance of identifying the origin of inflation in the present context of inflation targeting by many emerging market and transition economies the analysis shows based on south african data how structural supply and demand inflation can be distinguished the results indicate that south africa s inflation experience between 1973q1 and 1998q4 is characterized by two monetary regimes during the first regime 1973q1 1984q4 the long run cause of inflation is demand pull the second regime 1987q1 1998q4 represents major changes to structural imported and cost push inflation the two year period 1985 1986 signifies structural change from the first to the second regime moreover the results in the second regime remain robust when the inflation model is subjected to new out of sample data until 2001q2 evidence of structural imported inflation in the second regime suggests that inflation should not entirely be squeezed out of the system nor should it necessarily be k

the relevance of the invoicing currency in intra firm trade transactions abstract this paper extends the invoicing currency literature to the theory of multinational firms even with strong tax credit provisions net payments and receipts associated with intra firm trade usually do not consolidate to zero the statistical behavior of the resulting transactional value is affected by the decision on the invoicing currency thus a carefully chosen invoicing currency can create foreign exchange exposure which offsets some other risks of the firm the paper examines how and under what conditions this insight is relevant to a risk averse multinational enterprise a preliminary empirical study generates evidence which supports our ideas

non equivalent pass through of anti dumping duties countervailing duties and import tariffs we directly compare the short run pass through of tariffs anti dumping ad duties and countervailing cv duties into us import prices consistent with the theoretical predictions we find clear pattern of non equivalence in import price reaction to the three duty types with the most notable difference detected between ad duties and tariffs according to our estimates a tariff rate would have to be approximately two times higher than an ad duty rate in order to have the same effect on the delivered import price

international fish trade and exchange rates an application to the trade with salmon and fishmeal international fish trade is growing and fish exports represent an important source of foreign currency for many countries for a few countries the exports are also an essential part of the economy we revisit the seminal paper of richardson 1978 that addresses the issue of exchange rate pass through in commodity markets but in a multivariate cointegration framework the multivariate cointegration framework allows us to test common assumptions like exchange rate pass through leading price central markets and exogeneity of exchange rates this approach is particularly suited when studying markets for primary products we provide empirical examples using salmon imports to japan and fish meal exports from peru to germany

when are urban growth boundaries not second best policies to congestion tolls pines and sadka proved that a not too stringent urban growth boundary is a second best policy to congestion tolls when traffic congestion is unpriced by assuming that all jobs are exogenously located at one urban center monocentric city d pines e sadka zoning first best second best and third best criteria for allocating land to roads journal of urban economics 17 1985 167 183 the result is also implied by kanemoto y kanemoto cost benefit analysis and the second best land use for transportation journal of urban economics 4 1977 483 503 and arnott r arnott unpriced transport congestion journal of economic theory 21 1979 294 316 brueckner extrapolated this narrow theoretical result to real cities j brueckner urban sprawl diagnosis and remedies international regional science review 23 2000 160 179 we show that if there is no cross commuting between city and suburb first best efficient tolls on traffic can reduce congestion and total travel cost by shifting worker residents from the city to the suburbs causing urban expansion then planned urban boundaries of any stringency are not a second best policy because they induce people to relocate to more congested areas with cross commuting boundaries of any stringency can be inefficient even when tolls shrink cities as boundaries do little but tolls do a lot to reduce inefficient suburb to city commuting we also show that when the urban radius is limited by a natural boundary then growth boundaries of any stringency are inefficient

the dynamics of uncertainty or the uncertainty of dynamics stochastic j curves that the u s trade account will improve in response to a depreciation is not generally in doubt the key questions are by how much and by when addressing these questions involves studying the distribution of trade account responses to a depreciation given a depreciation of the dollar the paper generates this distribution by simulating a trade model with random drawings of both innovations and elasticity estimates unlike previous studies this analysis explains trade on a bilateral basis and uses the full information maximum likelihood estimator for parameter estimation according to the findings the dispersion of trade account responses grows over time and is directly related to the magnitude of the depreciation furthermore the probability of a slow adjustment of the trade account is relatively high and the 95 percent confidence intervals are too wide to be useful for policies that target a given trade account path copyright 1991 by mit press

the empirical role of the exchange rate on the crude oil price formation this paper adopts a novel empirical approach to the crude oil price formation for the purpose of understanding the price reactions of opec member countries to changes in the exchange rate of the us dollar against other major currencies and prices of other members the results are broadly consistent with the view of the absence of a unified opec determined price in the international crude market literature in addition the results also highlight a cross regional dimension of the crude oil market

the choice of exchange rate index and domestic price passthrough this paper finds that the extent of real appreciation and real depreciation in the external value of the dollar since the late 70s has been overstated for most industries by the federal reserve board s 10 country index and is better proxied by the dallas fed s 101 country index earlier findings seem robust to the choice of index namely changes in the real external value of the dollar have passed most fully into domestic prices of industries heavily reliant on imported inputs and producing import substitutes and least fully into capital intensive and concentrated industries and those protected by entry barriers copyright 1991 by blackwell publishing ltd

exchange rate pass through and international pricing strategy a conceptual framework and research propositions the extent to which exchange rate fluctuations affect international prices is called exchange rate pass through this paper develops a conceptual model in explaining how exchange rate fluctuations are channeled into international pricing strategy and offers research propositions our model posits that the extent of exchange rate pass through in international pricing is affected by the firm s pricing orientation performance orientation distribution policy and brand equity as well as by exchange rate uncertainty and competitive symmetry

a model of exchange rate pass through abstract exchange rate pass through is the phenomenon whereby changes in the value of foreign exchange are reflected in changes in import prices this paper presents a partial equilibrium model in which firms are price setters who anticipate exchange rate changes in equilibrium firms strategies incorporate expectations about the exchange rate consistently and are best responses to the strategies of all others in the world market it is shown that exchange rate changes give rise to import price changes but the degree of exchange rate pass through depends upon domestic and foreign market structures and the exchange rate regime in general exchange rate pass through is higher if the home market is monopolistic or if the foreign market is competitive

hyteresis in import prices the beachhead effect this paper shows that temporary real exchange rate fluctuations can have persistent hysteretic effects on trade specifically when market entry costs are sunk sufficiently large exchange rate shocks alter domestic market structure and thereby induce hysteresis this simple result has strong implications for exchange rate theory t rade policy and estimation of trade equations empirical evidence su ggests that the recent dollar overvaluation induced hysteresis in u s import prices namely the aggregate pass through equation of exchange rates to import prices shifted in the 1980s the shift s nature and timing is broadly consistent with the hysteresis hypothesis copyright 1988 by american economic association

declining exchange rate pass through to u s import prices the potential role of global factors this paper documents a robust and sustained decline in exchange rate pass through to u s import prices from well above 0 5 during the 1970s and 1980s to around 0 2 over the last decade we attribute this decline to the rising prominence of competition from china a shift in import pricing behavior since the asian financial crisis and the reduced share of material intensive goods in u s imports we also find evidence that foreign exporters are increasingly setting their prices with an eye on u s prices these results in turn suggest a new and more general hypothesis linking the decline in pass through to the evolving nature of competition in global markets and structural changes in international production patterns

the links between international parity conditions and granger causality a study of exchange rates and prices this article investigates granger causality between exchange rates and prices for the us and four of its trading partners canada germany japan and the uk we emphasize the distinction between direct and indirect granger causality exchange rates directly cause prices if movements in exchange rates lead movement in prices and exchange rates indirectly cause prices if deviations from the purchasing power parity ppp condition can help forecast movement in prices but only by including the interest rate differential in our error correction model do we obtain results that align with economic theory the economic theory of ppp suggests that exchange rates and prices are cointegrated with exchange rates moving proportionally to prices in the long run in general we find either direct or indirect feedback mechanisms between exchange rates and prices

unfair trade the increasing gap between world and domestic prices in commodity markets during the past 25 years the early literature on international trade has debated extensively the constraints facing exporting countries in the major commodity markets this article goes one step further by suggesting that the final demand for these products can not have increased because the declines in world commodity prices were not transmitted or were transmitted imperfectly to domestic consumer prices in contrast upward movements in world prices were clearly passed on to domestic prices as a result the spread between world and domestic prices almost doubled in all major commodity markets during 1975 94 this asymmetry seldom discussed in the literature does not seem to be caused at least systematically by changes in trade and tax policies or factors such as transport processing and marketing costs this article argues therefore that a special effort should be made to better understand the transmission from world to domestic prices especially the role of large international trading companies that may have the capability to influence such spreads through one or several stages of processing in most major commodity markets

exchange rates and import prices in the united states a varying parameter estimation of exchange rate pass through this article estimates the import price function in the united states using a varying parameter model the results show that the short run nonoil import price changes have become relatively less responsive to exchange rate changes than to foreign cost changes since the generalized floating began in the early 1970s concomitantly the markup has varied significantly falling when the dollar fell and rising when it rose thus pricing to market is confirmed even for overall u s imports

microeconomic implications of exchange rate variations this paper investigates the effect of exchange rate variations on the equilibrium of an industry in which domestic firms are competing with foreign suppliers the paper is designed as an expository survey it discusses the perfectly competitive industry exchange rate pass through under imperfect competition entry exit and hysteresis with fixed costs and exchange rate uncertainty copyright 1990 by oxford university press

exchange rates and import prices for a small open economy the case of ireland as a further contribution to the growing international literature on exchange rate pass through pt this study assesses the extent of pt for irish import prices over the period 1963 to 1995 it fills two important gaps in the literature by making due allowance for the time series properties of the data and by concentrating on the case of a small open economy in order to assess the extent of pt a mark up model for aggregate import unit values is employed it is argued that the usual single equation mark up estimation technique leads to seriously biased and inefficient estimates of the degree of pt as it ignores the strong simultaneity of import prices and domestic competing prices this study makes use of the johansen technique to allow for such simultaneity and uncovers two long run equilibrium relationships among the data for import unit values and domestic competing prices and confirms the existence of very close to full pt for both previous results in the literature demonstrating substantially

cost pass through in the u s automobile market we study cost pass through in the u s automobile market using a framework that incorporates the effects of cost changes on input decisions we find that accounting for firms factor market decisions significantly increases measured cost pass through although we reject the hypothesis of full cost pass through and constant markups in addition our evidence suggests that cost shocks common to all manufacturers have a greater effect on prices than do model specific cost shocks finally we examine how pass through varies with manufacturer nationality finding that u s firm cost pass through exceeds that of european and asian firms

targeted advertising the role of subscriber characteristics in media markets this paper seeks to establish the importance of targeted advertising in media markets using zip code level circulation for us daily newspapers i show that newspapers facing more competition have lower circulation prices but higher advertising prices than similar newspapers facing little or no competition i explain this by showing that newspapers in more competitive markets are better able to segment readers according to their location and demographics this leads to greater homogeneity in the characteristics of subscribers and raises advertisers willingness to pay for such readers the results imply a substantial benefit to advertisers and media firms from targeted advertising

winning or losing from dynamic bottleneck congestion pricing the distributional effects of road pricing with heterogeneity in values of time and schedule delay abstract this paper analyses the efficiency and distributional impacts of congestion pricing in vickrey s 1969 dynamic bottleneck model of congestion allowing for continuous distributions of values of time and schedule delay we find that congestion pricing can leave a majority of travellers better off even without returning the toll revenues to them we also find that the consumer surplus losses or gains from tolling are not strictly monotonic in the value of time because they also depend on the value of schedule delays the greatest losses are not incurred by drivers with the lowest value of time but by users with an intermediate value of schedule delays and the lowest value of time for that value of schedule delays for second best pricing with an untolled alternative the pattern of distributional effects is quite similar to that for first best pricing in contrast with results from prior static models users who are indifferent between the two alternative routes are not the ones who gain least from this type of second best pricing our results suggest that in assessing the distributional impacts of road congestion pricing it is important to take into account both the distribution of the value of time and of the value of schedule delays as well as the dynamics of departure time choice

exchange rate pass through in a small open economy the anglo irish case bilateral import unit values are constructed to investigate the extent and speed of exchange rate and production cost pass through into the unit values of irish imports total and sectoral from the uk using menon s 1996 mark up model the approach used to measure exchange rate pass through is based on cointegration and error correction modelling and the period of analysis is from 1979 to 1995 full pass through from the bilateral irish pound sterling exchange rate and from uk producer costs could not be rejected for total and sectoral import unit values for the sample period 1979q1 1995q4 this implies no role for domestic competing prices in explaining the long run relationship determining unit values of irish imports from the uk the results indicate that for aggregate and sectoral unit values of irish imports from the uk pass through is incomplete in the short run

cointegration and unit roots this paper provides an updated survey of a burgeoning literature on testing estimation and model specification in the presence of integrated variables integrated variables are a specific class of non stationary variables which seem to characterise faithfully the properties of many macroeconomic time series the analysis of cointegration develops out of the existence of unit roots and offers a generic route to test the validity of the equilibrium predictions of economic theories special emphasis is put on the empirical researcher s point of view

stickiness synchronization and passthrough in intrafirm trade prices about forty percent of all u s international trades occurs between related parties or intra rm such as trades between a parent and subsidiary of the same multinational corporation this paper uses a transaction level dataset that distinguishes arm s length

the degree and determinants of exchange rate pass through market structure non tariff barriers and multinational corporations this study investigates the exchange rate pass through for australian imports of manufactures pass through elasticities are estimated for total manufactures and forty product categories by applying an econometric procedure which avoids the pitfalls in previous studies to a carefully assembled data set the determinants of pass through are analyzed by relating the pass through elasticities to variables representing foreign control nontariff barriers product characteristics and market structure the author finds that pass through is incomplete for most products with significant variation across products unlike previous studies he finds that most of the variation in pass through is explained by the presence of multinational corporations and nontariff barriers copyright 1996 by royal economic society

urban economic theory land use and city size this book examines the economic reasons why people choose to live where they live and develops through analysis of the bid rent function a unified theory of urban land use and city size the first part of the book explicates the basic theory of urban land use and optimal city size residential location behavior of households is examined in a microeconomic framework and equilibrium and optimal patterns of residential land use are discussed the corresponding equilibrium and optimal city sizes are studied in a variety of contexts part two extends the classical theories of von thunen and alonso with the addition of externality factors such as local public goods crowding and congestion and racial prejudice the rigorous mathematical approach and theoretical treatment of the material make urban economic theory of interest to researchers in urban economics location theory urban geography and urban planning

game theoretic models of mixed oligopoly abstract in this paper we review various models that have been proposed for the study of mixed oligopoly that is markets in which private and public firm compete on equal basis using only market instruments

long run price effects of exchange rate changes in finnish pulp and paper exports this paper presents long run exchange rate elasticities of finnish newsprint and pulp export prices in the united kingdom uk and germany over the period 1980 94 the elasticities were estimated for a markup pricing model using johansen s cointegration method the magnitudes of the elasticity estimates obtained by imposing price homogeneity indicate that pass through of exchange rate changes to export prices has been incomplete in both markets for newsprint the pass through elasticity was 0 60 in the uk and 0 46 in germany which means that about one half of the changes in the exchange rates is reflected in prices as expressed in the destination countries currencies and about a half in prices measured in finnish markka instead in pulp exports the pass through elasticities differed from each other between the two destination countries more clearly than in newsprint exports indicating a different pricing behaviour of finnish pulp exporters in the uk and germany when exchange rate changes pass throug

price setting in online markets basic facts international comparisons and cross border integration we document basic facts about prices in online markets in the united states and canada which is a rapidly growing segment of the retail sector relative to prices in regular stores prices in online markets are more flexible and exhibit stronger pass through 60 75 percent and faster convergence half life less than two months in response to movements of the nominal exchange rate multiple margins of adjustment are active in the process of responding to nominal exchange rate shocks properties of goods sellers and markets are systematically related to pass through and the speed of price adjustment for international price differentials

exchange rate pass through abstract the resilience of trade balances of the major industrialized economies to changes in their exchange rates has evoked interest in the exchange rate pass through relationship so far there has not been a comprehensive survey of this literature the paper aims to fill this gap in two ways first it pieces together the theoretical literature on exchange rate pass through second it provides a critical survey of the empirical literature on exchange rate pass through emphasis is placed on the data and methodology employed in previous work this is done in order to guide future work in this growing area of research

congestion in a city with a central bottleneck we consider dynamic congestion in an urban setting where trip origins are spatially distributed all travelers must pass through a downtown bottleneck in order to reach their destination in the cbd each traveler chooses departure time to maximize general concave scheduling utility we find that at equilibrium travelers sort according to their distance to the destination the queue is always unimodal regardless of the spatial distribution of trip origins we construct a welfare maximizing tolling regime which eliminates congestion all travelers located beyond a critical distance from the cbd gain from tolling even when toll revenues are not redistributed while nearby travelers lose we discuss our results in the context of acceptability of tolling policies

de targeting advertising an assortment of products to loss averse consumers we consider product markets in which consumers are interested only in a specific product category and initially do not know which product category matches their tastes using sophisticated tracking technologies an intermediary can make inferences about a consumer s preferred product category and offer advertising firms the possibility to target their ads to match the consumer s taste such targeting reduces overall advertising costs and as a direct effect increases industry profits however as we show in this paper when consumers form reference prices and are loss averse more precise targeting may intensify competition between firms as a result firms may earn higher profits from de targeted advertising i e when the intermediary deliberately informs about some products and their price quotes from outside a consumer s preferred product category

exchange rate pass through abstract the pass through relationship between exchange rate and prices of manufactured exports is examined for korea it is found that exporters take competitors prices at the prime mover of price setting and let profits bear the brunt of adjustment to the exchange rate changes

pricing to market behaviour and exchange rate pass through in japanese exports this paper examines the relationship between exchange rate changes and japanese export pricing behavior employing a methodology which permits the separate measurement of pricing to market behavior and the cost impact of exchange rate changes the results suggest that incomplete pass through of exchange rate changes is a pervasive phenomenon but rejects the widely held view that japanese export firms have relied more heavily on pricing to market strategies during the period of yen appreciation in order to maintain market shares there is also evidence that estimates which capture only pricing to market behavior may over emphasise the degree of pass through to the extent that cost of production is sensitive to exchange rate changes copyright 1994 by royal economic society

a new look at pass through abstract this paper examines the relationship between exchange rates and prices rather than assuming exchange rate changes are exogenous shocks that affect prices i use a long run restrictions var to identify shocks and explore the way domestic prices import prices and exchange rates react to a variety of shocks consumer price pass through is nearly complete in response to some shocks but low in response to others alternatively import prices and exchange rates typically respond in the same direction and pass through seems quick this supports the idea that import prices are set in the producer s currency and that lower cpi pass through is a result of changes in quantities or margins further down the supply chain

export price responses to exogenous exchange rate movements the export price responses to three different exogenous exchange rate movements are investigated using data on swedish exports of automobiles and kraft paper to three destination countries a pric

segmentation advertising and prices this paper explores the implications of market segmentation on firm competitiveness in contrast to earlier work here market segmentation is minimal in the sense that it is based on consumer attributes that are completely unrelated to tastes we show that when the market is comprised by two consumer segments and when there is sufficient variation in the per consumer costs firms need to incur to access the different consumer populations then firms obtain positive profits in symmetric equilibrium otherwise the equilibrium is characterized by zero profits as a result a minimal form of market segmentation combined with advertising cost asymmetries across consumer segments give firms an opportunity to generate positive rents in an otherwise bertrand like environment

effects of the optimal step toll scheme on equilibrium commuter behaviour this paper derives commuters equilibrium queuing costs and equilibrium schedule delay costs before and after levying the optimal step tolls at a queuing bottleneck dealing with these equilibrium costs technically one can forecast some changes in equilibrium commuter behaviour from the no toll to the optimal step toll cases there is some useful information provided in this paper first the number of commuters who will or will not pay the tolls can be investigated before tolling a queuing bottleneck second all commuters departure time switching decisions from the no toll to the tolled cases can be investigated before tolling third the increased leisure time in the morning to the toll payer due to depart from home later than their original departure times in the no toll case can be investigated before tolling the above information of equilibrium commuter behaviour which the related literature has failed to provide is useful to policy makers if the optimal step toll scheme is considered to be put

exchange rate pass through into german import prices a disaggregated perspective this study analyses the exchange rate pass through into german import prices based on disaggregated data taken on a monthly basis between 1995 and 2012 our main contribution is twofold firstly we employ various time series techniques to analyse data for different product categories and also cointegration techniques to carefully distinguish between short run and long run pass through coefficients secondly in a panel data approach we estimate time varying pass through coefficients and explain their development with regard to various macroeconomic factors our results show that long run pass through is only partly observable and incomplete whereas short run pass through shows a more unique character although heterogeneity across product groups does exist we are also able to identify several macroeconomic factors that determine changes in the degree of pass through which is especially relevant for policymakers

exchange rates domestic prices and central bank actions recent u s experience central banks that are primarily concerned with the behavior of prices will use monetary policy to try to insulate prices from exchange rate changes prices then appear unresponsive to changes in the exchange rate the observed relationships between prices and the exchange rate will reflect central bank actions instead of the underlying relationship between exchange rates and prices this paper explicitly recognizes the role that policy plays in determining the observable relationships between exchange rates and prices and in so doing it illustrates how the underlying relationships can be unraveled using three different empirical approaches we examine the recent experience of the united states we find that the prices of various nondurable goods and even of some services respond modestly to the exchange rate and we find that the responses emerge most clearly when the role of monetary policy is explicitly considered these findings are consistent with the hypothesis that the federal reserve acts to mitigate the effects of exchange rate fluctuations on domestic prices the dramatic swings in currency values that characterize the current floating exchange rate period continue to inspire new research into their consequences for prices this paper examines those consequences for u s domestic prices the use of domestic price data is central to understanding the transmission of depreciation to inflation and it distinguishes this research from the many related studies that focus on the prices of imports and exports in examining the link between the exchange rate and domestic prices we emphasize the role of the central bank we note that a central bank that is primarily concerned with prices will act to insulate them from currency fluctuations if successful the central bank s actions will dampen the responses of prices to changes in the exchange rate and the underlying response will be partially masked as a consequence we provide empirical evidence of this dampening effect in the united states the prices of many u s nondurable goods and even of some services respond modestly to the exchange rate and their responses emerge most clearly when the role of monetary policy is explicitly considered our results also provide insight into the interpretation of some related studies of trade and

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

economics of a bottleneck abstract drawing on vickrey amer econ rev 59 251 261 1969 and subsequent literature this paper provides a thorough economic analysis of the simplest bottleneck model of road congestion with peak load demand in the morning rush hour a fixed number of identical individuals one per car must travel from home to work between which is a bottleneck of given capacity the costs of travel include queuing time and schedule delay time early or late for work the frequency distribution of departure times adjusts so that in equilibrium all individuals have the same travel costs the paper extends the previous literature by examining a coarse toll and solving for optimal capacities the application of congestion tolls can generate efficiency gains by altering the frequency distribution of departure times previous estimates of the efficiency gains from congestion tolling are likely to be substantially downward biased because they have ignored this effect