sticky prices and monetary policy evidence from disaggregated us data this paper disentangles fluctuations in disaggregated prices due to macroeconomic and sectoral conditions using a factor augmented vector autoregression estimated on a large data set on the basis of this estimation we establish eight facts 1 macroeconomic shocks explain only about 15 of sectoral inflation fluctuations 2 the persistence of sectoral inflation is driven by macroeconomic factors 3 while disaggregated prices respond quickly to sector specific shocks their responses to aggregate shocks are small on impact and larger thereafter 4 most prices respond with a significant delay to identified monetary policy shocks and show little evidence of a price puzzle contrary to existing studies based on traditional vars 5 categories in which consumer prices fall the most following a monetary policy shock tend to be those in which quantities consumed fall the least 6 the observed dispersion in the reaction of producer prices is relatively well explained by the degree of market power 7 prices in sectors with volatile idiosyncratic shocks react rapidly to aggregate monetary policy shocks 8 the sector specific components of prices and quantities move in opposite directions

spatial competition and the theory of differentiated markets an introduction spatial economics has been both in the very center of microeconomic theory and at its periphery it has been at the center to the extent that it has followed a tradition taking its roots in hotelling s classic stability in competition paper 15 and has used spatial concepts to explain by analogy the pricing of differentiated commodities it has been at the periphery to the extent that it has considered spatial pricing as observed in real life situations and tried to rationalize and evaluate observed spatial pricing techniques the former approach focuses on f o b pricing which is apparently taken for granted the latter focuses on discriminatory pricing which appears as the most frequently used technique in the industrial world the purposes of this special issue are to bring those two approaches together and to explore some of their analytical possibilities and limitations the philosophy of this introductory paper is to show the need for an integration of both avenues in an analysis of differentiated markets we begin by discussing the assumptions of what we will call the hotellinglosch approach and their implications in terms of the problems they allow us to tackle several papers in this issue contribute new insights in this respect we then undertake a similar exercise for what may be called the greenhutohta approach focusing on spatial price discrimination to discover the possibilities it may provide for an analysis of quality choice at the outset we note that its spatial approach typically implies partition of the

the ineffectiveness of quantitative restrictions with production diversion long ago meade 21 and samuelson 23 noted that when the number of goods exceeds the number of factors in a general equilibrium model the production set will not be strictly convex later studies have focused either on the shape and geometry of the production possibility frontier 22 17 18 15 26 13 or on generalizations of the stolper samuelson rybczynski and factorprice equalization theorems 22 16 4 27 little attention however has been given to the policy implications for quantitative restrictions qrs in a model with more goods than factors traditional results in trade theory are based on a 2 x 2 x 2 general equilibrium model within this context qrs have effects similar to tariffs namely they raise the domestic price of the protected good increase output and factor usage in the industry and raise the returns to factors used intensively in the industry 5 2 14 bhagwati 3 has shown that quotas and tariffs are equivalent when there is perfect competition in the domestic market but that equivalence will break down in the presence of a domestic monopoly further studies by itoh and ono 12 benson and hartigan 1 hwang and mai 11 and dockner and haug 7 demonstrate surprising results about when equivalence holds under various assumptions of imperfect competition 25 12 20 in this paper we will show that qrs need not be equivalent to tariffs even in a perfectly competitive model as long as there are more goods than factors of production we define production pattern replicate equilibria as the set of world production and trade configurations that can be supported by one vector of equilibrium prices in general replicate equilibria exist whenever there are more goods than factors because in this situation there will exist an infinite number of production configurations consistent with any equilibrium price vector in each country 2 as melvin 22 1263 points out the most important conclusion to be drawn from this indeterminacy is that the actual pattern of trade depends on which of the possible production configurations is chosen this corresponds to our notion of replicate equilibria since a qr represents a restriction only on a particular pattern of trade it may not preclude the existence of a replicate equilibrium not restricted by the qr

optimal electricity market for wind power abstract this paper is about electricity market operation when looking from the wind power producers point of view the focus in on market time horizons how many hours there is between the closing and delivering the bids the case is for the nordic countries the nordpool electricity market and the danish wind power production real data from year 2001 was used to study the benefits of a more flexible market to wind power producer as a result of reduced regulating market costs from better hourly predictions to the market wind power producer would gain up to 8 more if the time between market bids and delivery was shortened from the day ahead elspot market hourly bids by noon for 12 36 h ahead an after sales market where surplus or deficit production could be traded 2 h before delivery could benefit the producer almost as much gaining 7

protection with static collusion the present paper argues that when static collusion takes place there is a new justification for a tariff this occurs in the context of a model in which consumers observe prices at a cost and the industry structure is a duopoly with a home and a foreign firm because costly search induces imperfect information about prices on the part of consumers the ability to rapidly revise posted prices on the part of the duopolists leads to the appropriation of a substantial amount of consumer surplus the static collusion takes place under any trade policy thus a home tariff that shifts a duopoly equilibrium to the advantage of the home firm will be demonstrated to entail in the case of a nonprohibitive tariff no consumption cost from protection because this tariff generates revenue for the home government and greater profits for the home firm it will be welfare improving to the home country the concept of profit shifting as a motive for commercial policy in imperfectly competitive markets was pioneered by brander and spencer 6 2 in a model where home and foreign duopolists are nash courot competitors a tariff can shift profits from the foreign to the home firm by inducing the foreign firm to play less aggressively in the present paper the tariff shifts profits within the collusive outcome by precluding more aggressive play by the foreign firm 3 furthermore davidson 8 has disclosed that the level of a tariff can affect the incentives to collude in a quantity setting supergame with nash cournot punishments in the present model the tariff affects the collusive outcome that can be supported it does not however affect the incentives to collude

spatial competition with free entry chamberlinian tangencies and social efficiency abstract free entry in loschian spatial competition leads to a tangency between each firm s negatively sloped average revenue and the downsloping portion of average costs as in chamberlin s monopolistic competition it is generally concluded that this equilibrium involves too many inefficiently small firms however this conclusion is incorrect the difference between price and firm marginal production costs in spatial equilibrium is just sufficient to cover the additional marginal cost of output resulting from availability of multiple locations this chamberlinian tangency does not imply inefficiency because it does not include all the social costs and benefits resulting from spatial competition

collateral effects of liberalisation metering losses load profiles and cost settlement in spain s electricity system european energy markets have undergone a major transformation as they have advanced towards market liberalisation and it is vital that the details of these developments be carefully examined the success of liberalisation is based on smart regulation which has been capable of providing solutions to unforeseen events in the process our paper seeks to contribute to existing understanding of the unexpected and collateral effects of the liberalisation process in the power system by examining a natural experiment that occurred in spain in 2009 in that year the electricity supply by distribution system operators disappeared this change in retail market competition as we demonstrate in this paper has had an unexpected effect in terms of the system s balancing requirements we undertake a rigorous assessment of the economic consequences of this policy change for the whole system in terms of its impact on final electricity prices

tariffs and quotas in a spatial duopoly this paper applies a model similar to those used in benson and hartigan 2 and greenhut greenhut and kelly 11 to examine the relative impacts of a tariff and a quota in a domestic market characterized by spatially distributed consumers significant transportation costs and oligopolisticly interdependent domestic and foreign producers our predictions diverge from those derived in nonspatial trade models based on perfectly competitive monopoly and oligopoly market structures thus we establish three propositions to highlight the major differences bhagwati 3 4 demonstrated that tariffs and quotas are not equivalent in the presence of a domestic monopoly in a partial equilibrium model the implication was that imperfectly competitive markets eliminated the possibility of tariff quota equivalence so the choice of trade restrictions became an important policy question our first and perhaps least interesting proposition is that complete tariff quota equivalence can arise in an imperfectly competitive spatial market if the tariff and quota do not induce different price conjectural variations on the part of the duopolists full equivalence does not arise under the likely circumstance that entrepreneurial behavior is influenced by the trade barrier chosen however in a separate proposition we extend benson and hartigan s 2 result that a tariff can lead to the metzler 15 paradox a fall in domestic price after imposition of the tariff in a partial equilibrium spatial oligopoly model to an import quota this contrasts strikingly with falvey s 8 analysis and tower s 20 modifications which established that the metzler paradox cannot occur with an import quota in a perfectly competitive general equilibrium model 2 it also contrasts with panagariya 18 who devised a general equilibrium model

an anomaly in the service industry the effect of entry on fees in the context of traditional microtheory the entry of new firms into a competitive market is always expected to lower the price of the product being exchanged however several empirical investigations of the private health care industry in the united states have uncovered an apparently perverse relation as the number of health care providers in the market increases the price of the health care service the nominal fee increases a statistically significant positive relation between fees and health care provider density e g physicians per capita has been reported by newhouse i970 fuchs and kramer i972 and dyckman i978 indeed pauly and satterthwaite i 980 asserted that the zero order correlation between physicians per capita and various measures of physician fees tends invariably to be positive these empirical data spawned a number of analyses of the fees charged in private health care markets some researchers used competitive models e g feldstein i970 and fuchs and kramer i972 and assumed health care providers to be price takers most notable however are the papers which abandoned neoclassical theory and turned instead to targeted income demand creation the idea that service providers are able to create demand was first introduced formally by newhouse i970 and subsequently expanded upon by evans et al i973 green i978 fuchs i978 and dyckman i978 the notion was that health care providers have some target income and if the number of providers increases each provider can maintain income by advising patients to consume additional services e g more diagnostic tests the providers are able to create demand and can increase the fee charged along the new demand curve anderson et al i 98 i examined theoretically the concept of supplier induced demand as they demonstrated supplier induced demand can explain the observed positive relation between provider density and fees however such a model also yields additional predictions not borne out empirically e g organised medicine would promote entry of new practitioners additional empirical evidence provided by pauly and satterthwaite i98i also puts into question the validity of targeted income demand creation we propose to reconcile the empirical evidence with traditional microtheory we utilise the full price notion introduced by devany i976 but our analysis goes beyond the implication that demand elasticity increases as more customersupplied time is required our analysis also differs from pauly and satterthwaite s i980 i98i attempt at reconciliation via their theory of increasing

sticky prices or rational inattention what can we learn from sectoral price data abstract this paper derives stylised facts on sectoral inflation dynamics and confronts these facts with two popular theoretical models of price setting based on sectoral price responses to macroeconomic shocks estimated from an approximate factor model we find that the frequency of price changes explains a relevant share of the cross sectional variation of the speed and size of responses moreover there is little evidence that the volatility of sectoral inflation due to idiosyncratic shocks dampens the size and speed of the responses to macroeconomic shocks these findings support a multi sector model with sticky prices rather than a rational inattention model we derive the results from different modelling and sampling decisions proposed in the literature and we find that the explanatory power of the frequency of price changes for the speed of response to a macroeconomic shock proves robust in the face of these decisions other results are sensitive with respect to the choice of the factor model and the treatment of outliers

search and consumer theory a consumer faces list prices for commodities but can buy one at a discount discounts vary randomly between sellers the number of quotations sought depends on list prices search costs and wealth this function is homogeneous of degree zero and provided some sufficient conditions are satisfied is increasing in wealth decreasing in search cost independent of the list price of the discounted commodity if indirect utility is multiplicatively separable increasing in the list price if the commodity is a necessity increasing in the list price of substitutes slutsky s equation is generalized to include search

revocable pricing can yield collusive outcomes abstract traditional models of bertrand price competition assume irrevocable price announcements in contrast when price changes have zero direct costs but sales are thereby delayed the collusive monopoly outcome is a subgame perfect outcome and is moreover the natural focal equilibrium

an experimental investigation of equilibria impacts of information the theoretical literature on pricing in a spatial setting where transportation costs exist and both buyers and sellers are geographically distributed has been expanding and developing at a rapid pace indeed it has been shown that the theoretical analysis of differential product markets is equivalent to the spatial framework 21 22 however empirical analysis of implications from these theoretical developments has only recently begun to appear one question that is frequently asked since spatial competition is modeled in an oligopoly framework is which price reaction is most likely 8 905 for f o b price setters in an interdependent spatial market also see 2 5 6 18 among others similarly one might ask which price reaction is most likely in a differentiated product market answers have been proposed on the basis of theoretical and or intuitive arguments but the issue has not been adequately explored empirically the purpose of the study described in the following presentation was to empirically evaluate the various arguments about pricing behavior in spatial or product variety competition perhaps the primary reason for the lack of empirical analysis in regard to pricing behavior when consumers differentiate between sellers for locational or other reasons is lack of a data set

menu costs and phillips curves this paper develops a model of a monetary economy in which individual firms are subject to idiosyncratic productivity shocks as well as general inflation sellers can change price only by incurring a real menu cost we calibrate this cost and the variance and autocorrelation of the idiosyncratic shock using a new u s data set of individual prices due to klenow and kryvtsov the prediction of the calibrated model for the effects of high inflation on the frequency of price changes accords well with international evidence from various studies the model is also used to conduct numerical experiments on the economy s response to various shocks in none of the simulations we conducted did monetary shocks induce large or persistent real responses

on price increasing entry it is shown that the effect of the number of sellers on price can be related to a concept of elasticity which links consumers brand loyalty to the quantity sold by each firm a class of inverse demand functions for differentiated goods which lends itself to the analysis of the conditions of price increasing entry is formulated the effects of entry on price are decomposed into a competitive and a displacement effect copyright 1987 by the review of economic studies limited

an explanation of intra industry trade in identical commodities abstract a model of international trade under conditions of spatial price discrimination is developed in order to demonstrate that intra industry trade is identical commodities can occur between two countries over a wide range of market structures the geographic extent of intra industry trade is shown to be inversely related to the degree of competition affecting imports in each country in the sale of the homogeneous commodity furthermore the degree of intra industry trade is directly related to the incidence of spatial price discrimination in favor of distant customers

can aggregation explain the persistence of inflation abstract an aggregation exercise is proposed that aims at investigating whether the fast average adjustments of the disaggregate inflation series of the euro area cpi is coherent with the slow adjustment of euro area aggregate inflation estimating a dynamic factor model for 404 inflation sub indices of the euro area cpi allows to decompose the dynamics of inflation sub indices into a part due to a common macroeconomic shock and to sector specific idiosyncratic shocks although idiosyncratic shocks dominate the variance of sectoral prices one common factor appears to be the main driver of aggregate dynamics in addition the heterogenous propagation of this common shock across sectoral inflation rates and in particular its slow propagation to inflation rates of services generates the persistence of aggregate inflation we conclude that the aggregation mechanism explains a significant amount of aggregate inflation persistence

paralyzed by fear rigid and discrete pricing under demand uncertainty we propose a new theory of price rigidity based on firms knightian uncertainty about their competitive environment this uncertainty has two key implications first firms learn about the shape of their demand function from past observations of quantities sold this learning gives rise to kinks in the expected profit function at previously observed prices making those prices both sticky and more likely to reoccur second uncertainty about the relationship between aggregate and industry level inflation generates nominal rigidity we prove the main insights analytically and quantify the effects of our mechanism our estimated quantitative model is consistent with a wide range of micro level pricing facts that are typically challenging to match jointly it also implies significantly more persistent monetary non neutrality than in standard models allowing it to generate large real effects from nominal shocks

anti dumping laws production location and prices in a three country model of international trade the price effects of anti dumping laws and of tariffs in the presence of anti dumping laws may be counter intuitive the application of an anti dumping law may lead to a decline in the price of an imported good in the protecting country or an increase in the price of the good in the original host country the imposition of an import tariff in the presence of an anti dumping law may result in a decline in domestic price of the import in the policy active country

tariffs quotas and market structure this paper examines the effects of tariffs and quotas on the pricing pattern of producers in the case of duopoly by a domestic monopolist and a foreign monopolist it is pointed out that tariffs and quotas may induce completely different pricing patterns in the two producers under a quota it is always profitable for the home producer to be a price leader and for the foreign producer to be a follower whereas under a tariff either producer may become a leader it is also proved that whatever leader follower relation is chosen under a tariff a quota always bring about a higher domestic price than the tariff as long as both permit the same amount of imports

quick responses in duopoly ensure monopoly pricing if firms in a homogeneous duopoly game can respond with negligible delay to their rival s price changes equilibrium is unique at the monopoly price

equilibrium price distributions equilibrium price distributions for a homogeneous product consistent with individual incentives are investigated they arise in informationally imperfect markets in which the only primitive datum is the distribution of search costs it is shown that single multi and continuous price distributions are all viable long run phenomena depending on the nature of search costs a method for computing equilibrium price distributions is also provided jevons law of one price has long been an accepted dictum in economic theory in a classroom presentation it still serves sometimes implicitly as a major premise in many micro models of market interaction much of the descriptive theory as well as welfare analysis hinges on this assumption yet one s day to day experience reveals that price differentials are a viable phenomenon and that looking for lower prices may very well be a rewarding activity the prospects of eventually hitting a bargain and the resulting price reduction would more than compensate for the cost incurred during the search process moreover the existence of price dispersions appear to be an empirically stable phenomenon snapshots of markets for relatively homogeneous products reveal substantial and recurring price differentials stigler 1961 and pratt wise and zeckhauser 1979 for example report some evidence supporting this claim an important article by stigler 1961 focused economists attention on the crucial role played by the informational structure of markets it gave rise to the study of the

effects of large scale penetration of renewables the italian case in the years 2008 2015 abstract italy has experienced a revolution in the electricity production mix in the years 2008 2015 when a large scale deployment of intermittent renewables caused a high volatility of electricity prices stopped the investments in both fossil and renewable power plants and caused a high degree of uncertainty in matching electricity demand and supply the current legislation gives renewable energy the priority of dispatchment producing a significant decrease of the operational hours of all kinds of power plants which caused economic problems to utilities that had started investments in new high efficiency combined cycles before 2008 and reduced the overall efficiency of fossil fired power generation in order to restore the opportunities for further investments in renewable energy systems it is very important to develop long term policies and interventions to improve the capacity to balance the electricity demand and supply

tariffs which lower price in the restricting country an analysis of spatial markets abstract tariff impacts are examined assuming the domestic and foreign producers are oligopolistically interdependent and both domestic and foreign transportation costs are significant the imposition of a tariff in this spatial duopoly 1 has a distributional impact under all three conjectural variations considered in that the delivered prices paid by customers of the foreign firm increase by more than the delivered prices paid by customers of the protected domestic firm and 2 under some types of oligopolistic behavior the domestic firm may lower its price when protected by a tariff that is the metzler paradox may arise in a partial equilibrium context

cartel stability and tariff policy abstract in this paper we investigate the effect that tariff policy has on the ability of firms to collude in oligopolistic industries we find that small tariff rates lead to an industry structure more conducive to collusive behavior while large tariff rates weaken cartels there exists a critical tariff rate which has no effect on the cartel s stability this critical value is found to be a decreasing function of n the number of firms in the industry and n d n the proportion of firms that are domestic

commercial policy and intra industry trade abstract this paper constructs a model of intra industry trade within a multi product industry whose output range is limited to that obtainable from a particular type of capital intra industry trade is a natural outcome in this structure without requiring increasing returns to scale or imperfectly competitive markets and with its pattern determined along traditional relative factor abundance lines the volume of this trade will vary inversely with the level of trade restrictions as observed empirically other policies are then considered for their influence on the range rather than the level of domestic production since the former is the more likely policy objective under these circumstances

the impact of regulatory quality and corruption on residential electricity prices in the context of electricity market reforms abstract the european electricity markets have been undergoing significant regulatory reforms since the introduction of the first liberalisation directive in 1996 theory predicts that liberalisation promotes cost efficient production and competition and hence leads to lower prices the goal of this paper is to assess the impact of regulatory quality and non compliance with the law on electricity prices in the context of electricity market reforms we address problems of endogeneity by using the blundell blond system gmm estimator and find that vertical integration and market concentration lower end user prices all else equal moreover improving regulatory quality and reducing corruption both have a negative impact on prices when holding other factors constant the intensity of the reforms has limited impact on electricity prices when these reforms are introduced in an institutional environment characterised by high levels of corruption and low quality regulation

five facts about prices a reevaluation of menu cost models are price decreases 3 the frequency of price increases covaries strongly with inflation whereas the frequency of price decreases and the size of price increases and price decreases do not 4 the frequency of price change is highly seasonal it is highest in the first quarter and then declines 5 we find no evidence of upwardsloping hazard functions of price changes for individual products we show that the first second and third facts are consistent with a benchmark menu cost model whereas the fourth and fifth facts are not

price points and price dynamics abstract a standard model of price setting is extended to include an important role for price points as well as sticky information it makes empirically reasonable predictions about the frequency of price adjustments the sizes of price increases and decreases the shape of the hazard function the fraction of price changes that are price increases and the relationship between price changes and inflation when the model of price setting is integrated into a small scale dsge model it implies plausible aggregate effects of monetary policy in contrast to a model with a prominent role for price points but no information rigidities

sectoral price data and models of price setting in the median sector 100 percent of the long run response of the sectoral price index to a sector specific shock occurs in the month of the shock the standard calvo model and the standard sticky information model can match this finding only under extreme assumptions concerning the profit maximizing price the rational inattention model of mackowiak and wiederholt 2009a optimal sticky prices under rational inattention american economic review 99 769 803 can match this finding without an extreme assumption concerning the profit maximizing price furthermore there is little variation across sectors in the speed of response of sectoral price indexes to sector specific shocks the rational inattention model matches this finding while the calvo model predicts too much cross sectional variation

capital subsidies and countervailing duties in oligopolistic industries abstract under gatt countries are allowed to impose countervailing duties to offset foreign subsidies however gatt rules limit the amount of duty to the amount of the subsidy this paper examines a generalized model of imperfect competition with capital subsidies and shows the conditions under which a countervailing duty will offset the effect of the subsidy on exports also conditions are specified under which exports will increase despite the imposition of the maximum tariff under gatt in addition the paper considers whether profit shifting motives for a subsidy still exist even when this maximum duty is anticipated

balancing power and variable renewables three links abstract balancing power is used to quickly restore the supply demand balance in power systems the need for this tends to be increased by the use of variable renewable energy sources vre such as wind and solar power this paper reviews three channels through which vre and balancing systems interact the impact of vre forecast errors on balancing reserve requirements the supply of balancing services by vre generators and the incentives to improve forecasting provided by imbalance charges the paper reviews the literature provides stylized facts from german market data and suggests policy options surprisingly while german wind and solar capacity has tripled since 2008 balancing reserves have been reduced by 15 and costs by 50

a review of balancing costs in italy before and after res introduction abstract the massive introduction of res in electricity markets is recognized to have induced a merit order effect on wholesale prices while day ahead prices are likely to decline as res e production increases the effects on balancing market sessions are more ambiguous taking into account the northern italian zone characterized by a high solar pv and hydro penetration we provide empirical evidence that balancing quantities decreased while costs increased between two samples associated with low 2006 08 and high 2013 15 res levels we estimate balancing costs for different technologies and compare their dynamics across specific hours we find evidence of increasing balancing prices in particular market conditions that we interpret as a signal of strategic use of real time sessions by conventional producers prone to the merit order effect in the day ahead market we compare our results to those obtained in the german market where on the contrary balancing costs have decreased and postulate that the different market designs may explain these results our findings suggest that the italian policy makers should carefully monitor all trading sessions especially those close to real time to avoid the exercise of market power by few operators allowed to guarantee system security and additionally to promptly adopt a capacity market

the ambiguous consequences of anti dumping laws the anti dumping law is most often applied in oligopolistic industries while most analyses focus on the monopoly model i analyze a duopoly model where a foreign firm engages in price based dumping under cournot behavior the anti dumping law has ambiguous price and welfare effects when the home firm is a stackleberg leader two disquieting effects emerge first the home firm can use the anti dumping law to curtail competition even when the foreign firm does not initially engage in dumping second the anti dumping law can increase profits of both firms at the expense of domestic consumers

optimal fiscal regime in a spatial duopoly abstract we investigate a horizontally differentiated duopoly in which a public authority can either tax or subsidize firms in order to induce duopolists to choose the socially optimal locations the policy proposed here is such that welfare maximization is achieved by directly affecting firms location without explicitly modifying their price behavior

comparative performance of spatial models of economic markets with linear household demand a fundamental precept of the traditional theory of economic markets holds that price competition among firms within the model of perfect competition maximizes economic welfare it follows that the establishment of monopolies or oligopolies will result in reduced economic welfare when compared with a perfectly competitive equilibrium however with scattered buyers and positive transportation cost paid by these buyers the demand curve facing each individual firm is necessarily downward sloping and perfect competition is no longer viable 2 furthermore these circumstances in combination with declining average cost warrant the use of spatial models of economic markets it is the purpose of this paper to examine various spatial models and to compare their impact on economic welfare bringing into question the robustness of traditional economic theory holahan 11 concludes that in the spatial context a multiplant monopolistic equilibrium is superior to a competitive equilibrium in high density areas the spatial competitive model employed by holahan has been widely accepted as the standard spatial representation of competitive behavior this model developed by l6sch 13 and further refined by mills and lay 14 and beckmann 1 2 is based on the assumption that in the short run each firm s market area is fixed the implication of this assumption is that all price changes are undertaken uniformly across all firms within the market presumably price changes are undertaken in unison due either to collusion or price leadership the competitive nature of the l6schian model is evident only in the long run as free entry is assumed to prevail capozza and van order 5 have demonstrated that the loschian model is just one particular type of a class of spatial models compatible with free entry each of these

analysis of the imbalance price scheme in the spanish electricity market a wind power test case this work investigates the interaction between wind power and electricity markets the paper is focused on balancing markets pricing policies the proposal of a new imbalance price scheme is included and conveniently evaluated this proposed scheme tries to minimise the use of ancillary services to compensate for deviations in searching for a more efficient market design the effectiveness of imbalance prices as market signals is also examined and policy recommendations regarding imbalance services are discussed two test cases are included that analyse the participation of a wind power producer in the spanish electricity market using a stochastic optimisation strategy for this purpose the uncertainty of the variables is considered i e wind power production and prediction intraday and imbalance prices test cases were run with real data for 10 months and realistic results are presented along with a hypothetical test case the regulation of the imbalance prices may not be adequate for the spanish electricity market because an error drop is not sufficiently encouraged therefore we suggest the application of a new imbalance price scheme which includes an additional constraint the conclusions of this paper can be assumed to be general policy recommendations

monetary non neutrality in a multisector menu cost model empirical evidence suggests that as much as one third of the u s business cycle is due to nominal shocks we calibrate a multisector menu cost model using new evidence on the cross sectional distribution of the frequency and size of price changes in the u s economy we augment the model to incorporate intermediate inputs we show that the introduction of heterogeneity in the frequency of price change triples the degree of monetary non neutrality generated by the model we furthermore show that the introduction of intermediate inputs raises the degree of monetary non neutrality by another factor of three without adversely affecting the model s ability to match the large average size of price changes a single sector model with a frequency of price change equal to the median rather than the mean generates monetary non neutrality similar to that in our multisector model our multisector model with intermediate inputs generates variation in real output in response to calibrated aggregate nominal shocks that can account for roughly 23 of the u s business cycle

refining stylized facts from factor models of inflation summary factor models of disaggregate inflation indices suggest that sectoral shocks generate the bulk of sectoral inflation variance but no persistence aggregate shocks by contrast are the root of sectoral inflation persistence but have negligible relative variance we show that simple factor models do not cope well with essential features of price data in particular sectoral inflation series are subject to features such as measurement error sales and item substitutions in factor models these blow up the variance of sector specific shocks while reducing their persistence we control for such effects by estimating a refined factor model and find that inflation variance is driven by both aggregate and sectoral shocks sectoral shocks too generate substantial inflation persistence both findings contrast with earlier evidence from factor models but align well with recent micro evidence our results have implications for the foundations of price stickiness and provide quantitative inputs for calibrating models with sectoral heterogeneity copyright 2014 john wiley sons ltd

on the equivalence of tariffs and quotas under duopoly abstract the purpose of this paper is to use a conjectural variation approach to examine the equivalence of tariffs and quotas set so as to result in the same equilibrium quantity of imports we have demonstrated that whether tariffs and quotas are equivalent depends crucially upon the particular value of the conjectural variations specifically in the case of equal import tariffs and quotas the equivalence holds only in the cournot case otherwise the domestic price is lower or higher under quotas depending upon whether competition is less or more competitive than cournot

hotelling models a general equilibrium approach economic models wherein consumers are spatially separated from production and distribution outlets have captivated the attention of economists at least since the seminal work of harold hotelling 8 under standard assumptions of uniformity there exist apparent tradeoffs between such variables as firm size number of firms and distance between firms which must be resolved if the economy is to perform efficiently that is as the number of firms increase the average transport distance decreases and transport costs must be balanced with scale effects in production when analyzed in the context of standard models of market structure allocative problems associated with monopolistic competition and conjectural variation seem to preclude an efficient competitive equilibrium this general conclusion may be drawn from models developed by smithies 11 losch 9 greenhut and ohta 4 benson 1 and ohta 10 the specific features and conclusions of these works have been well summarized by capozza and van order 2 and by villegas 12 although these models differ with regard to behavioral assumptions attributed to individual firms the imperfectly competitive equilibria are invariably characterized by prices in excess of marginal cost welfare losses and excess capacity for reasons discussed below partial equilibrium analysis cannot adequately address this problem because land markets are fundamental to the functioning of a spatial economy therefore the purpose of this paper is to reexamine the functioning of a hotelling type spatial economy in the context of a general equilibrium model which addresses the interactive effects of a product market a land market and a factor market the model includes a more general form of the firm s production function as well as a general representation of transport costs the major conclusions of the paper are 1 the optimality conditions reveal that a two part pricing structure must prevail if a decentralized economy is to allocate its resources efficiently 2 a market equilibrium that appears to be monopolistically competitive but is actually purely competitive is consistent with pareto optimality even though firms have some control over prices and operate under increasing returns to scale in production

optimal sticky prices under rational inattention this paper presents a model in which price setting firms decide what to pay attention to subject to a constraint on information flow when idiosyncratic conditions are more variable or more important than aggregate conditions firms pay more attention to idiosyncratic conditions than to aggregate conditions when we calibrate the model to match the large average absolute size of price changes observed in micro data prices react fast and by large amounts to idiosyncratic shocks but only slowly and by small amounts to nominal shocks nominal shocks have strong and persistent real effects we use the model to investigate how the optimal allocation of attention and the dynamics of prices depend on the firms environment jel e 3 e5 d8

on the importance of sectoral and regional shocks for price setting summary we use novel disaggregate sectoral regional euro area data to investigate the sources of price changes introducing a new method to extract factors from overlapping data blocks that allows for estimation of aggregate sectoral country specific and regional components of price changes our sectoral component explains much less variation in disaggregate inflation rates and exhibits much less volatility and more persistence than previous findings for the us indicate country and region specific factors play an important role emphasizing heterogeneity of inflation dynamics along both sectoral and geographical dimensions our results are incompatible with basic sticky information or calvo type price setting models but require multi sector multi country models copyright 2015 john wiley sons ltd

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

production effects of price and cost based anti dumping laws under flexible exchange rates this paper investigates the production response of an exporting firm when faced with the threat of an anti dumping ad action the firm s production decision is sensitive to market conditions at home and abroad as well as to the definition of dumping we examine the incentives facing the exporting firm under price based marginal cost based and average total cost based anti dumping laws depending on the nature of the anti dumping rules and market conditions a firm s production may rise fall or remain unchanged in response to ad legislation les effets de production des lois anti dumping fondees sur les prix et sur les couts dans un