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

comparative dynamics in a health investment model the method of comparative dynamics fully exploits the inter temporal structure of optimal control models i derive comparative dynamic results in a simplified demand for health model the effect of a change in the depreciation rate on the optimal paths for health capital and investment in health is studied by use of a phase diagram

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

1 000 cash back the pass through of auto manufacturer promotions automobile manufacturers frequently use promotions involving cash incentives while payments are nominally directed to either customers or dealers the ultimate beneficiary of the promotion depends on the outcome of price negotiation we use program evaluation methods to compare the incidence of these two types of promotions customers obtain 70 to 90 percent of a customer rebate but only 30 to 40 percent of a dealer discount promotion a 500 difference for a typical promotion our leading hypothesis is that pass through rates differ because of information asymmetries customer rebates are well publicized to customers while dealer discount promotions are not

costs of implementation bargaining costs versus allocative efficiency abstract a mechanism with low direct cost of use may be preferred to alternatives implementing more efficient allocations we show this experimentally by giving pairs of subjects the option to agree on a single average price for a sequence of trades in effect pooling several small bargains into a larger one we make pooling costly by tying it to some inefficient trades but subjects nevertheless reveal strong tendencies to pool particularly when more bargains remain to be struck and when bargaining is face to face the results suggest that implementation costs could play a significant role in the use of many common trading practices

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

price scarcity rent and a modified r per cent rule for non renewable resources since hotelling s seminal paper on the optimal depletion of exhaustible resources much has been published yet confusion remains about whether scarcity rent and price increase or decrease as a resource is depleted when costs tend to rise with depletion we show that hotelling s fundamental results of rising scarcity rent and price paths are sustained and that the path of scarcity rent converges on the r per cent rule provided the objective function is concave predictions of non monotonic or declining scarcity rent paths are due to implicit assumptions that lead to a non concave objective function we identify the sources of these non concavities jel classification q30 d90 c60 prix rente de rarete et une regle modifiee du r pourcent pour les ressources non renouvelables malgre la volumineuse litterature specialisee qui a fleuri depuis qu hotelling a ecrit son memoire fondateur sur l epuisement optimal des ressources renouvelables une grande confusion regne toujours quand il faut etablir si la rente de rarete et le prix augmentent ou chutent a proportion que la ressource s epuise quand les couts tendent a croitre avec l epuisement ce memoire montre que les resultats fondamentaux obtenus par hotelling quant aux sentiers de croissance de la rente de rarete et du prix tiennent toujours et que le sentier de croissance de la rente de rarete converge vers la regle du r pourcent pourvu que la fonction objective soit concave les predictions de sentiers de croissance non monotone ou de declin de la rente de rarete presentees dans la litterature specialisee sont attribuables a des postulats implicites qui engendrent une fonction objective non concave les auteurs identifient les sources de ces non concavites

bargaining and reputation the paper develops a reputation based theory of bargaining the idea is to investigate and highlight the influence of bargaining postures on bargaining outcomes a complete information bargaining model a la rubinstein is amended to accommodate irrational types who are obstinate and indeed for tractability assumed to be completely inflexible in their offers and demands a strong independence of procedures result is derived after initial postures have been adopted the bargaining outcome is independent of the fine details of the bargaining protocol so long as both players have the opportunity to make offers frequently the latter analysis yields a unique continuous time limit with a war of attrition structure in the continuous time game equilibrium is unique and entails delay consequently inefficiency the equilibrium outcome reflects the combined influence of the rates of time preference of the players and the ex ante probabilities of different irrational types as the probability of irrationality goes to zero delay and inefficiency disappear furthermore if there is a rich set of types for both agents the limit equilibrium payoffs are inversely proportional to their rates of time preference

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

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

on the nonexistence of market equilibria in exhaustible resource markets with decreasing costs this paper examines the existence of competitive equilibria in markets for exhaustible resources where there are initial economies of scale in either the extraction of the resource or the utilization of the resource as an input in production in such instances which are fairly common we find that the classic hotelling rule for competitive extraction does not apply since competitive price equilibria generally do not exist this is in marked contrast to static markets where the usual textbook example of firms with u shaped average cost curves is not inconsistent with the existence of competitive equilibria furthermore oligopolistic market equilibria in which resource firms act as nash producers may also fail to exist when there are returns to scale in production

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

alternating offer bargaining with two sided incomplete information i study alternating offer bargaining games with two sided incomplete information about the players discount rates for both perfect bayesian equilibrium and a rationalizability style notion i characterize the set of expected payoffs which may arise in the game i also construct bounds on agreements that may be made the set of expected payoffs is easy to compute and incorporate into applied models my main result is a full characterization of the set of perfect bayesian equilibrium payoffs for games in which the distribution over the players discount rates is of wide support yet is in a weak sense close to a point mass distribution i prove a lopsided convergence result each player cannot gain from a slight chance that she is a strong type but the player can suffer greatly if there is a slight chance that she is a weak type

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

a qualitative characterization of the competitive nonrenewable resource extracting firm abstract using variational differential equations a systematic qualitative analysis is carried out for the competitive nonrenewable resource extracting firm the parameters of interest are the output price variable input price discount rate lease length initial resource stock and various tax rates the effects of changes in these parameters on the entire optimal time paths of the current shadow value of the stock the resource stock and the extraction rate are characterized in the perturbed phase plane

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

waiting to persuade i analyze a sequential bargaining model in which players are optimistic about their bargaining power measured as the probability of making offers but learn as they play the game i show that there exists a uniquely predetermined settlement date such that in equilibrium the players always reach an agreement at that date but never reach one before it given any discount rate if the learning is sufficiently slow the players agree immediately i show that for any speed of learning the agreement is delayed arbitrarily long provided that the players are sufficiently patient therefore although excessive optimism alone cannot cause delay it can cause long delays if the players are expected to learn

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

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

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

the comparative advantages of firms markets and contracts a unified theory the most efficient labour market mechanism depends on the advantages of specialization workers costs of switching between entrepreneurs and the frequency with which needs change multilateral mechanisms are more efficient when specialization is more advantageous when it is cheap for workers to switch between entrepreneurs and when individual entrepreneurs cannot occupy a worker on a full time basis given a bilateral mechanism employment a firm is more efficient than contracts when in process adjustments arise more frequently there exist three regions in which firms markets and sequences of bilateral contracts are weakly more efficient than all other mechanisms in a big class

bargaining reputation and equilibrium selection in repeated games with contracts consider a two person intertemporal bargaining problem in which players choose actions and offers each period and collect payoffs as a function of that period s actions while bargaining proceeds this can alternatively be viewed as an infinitely repeated game wherein players can offer one another enforceable contracts that govern play for the rest of the game theory is silent with regard to how the surplus is likely to be split because a folk theorem applies perturbing such a game with a rich set of behavioral types for each player yields a specific asymptotic prediction for how the surplus will be divided as the perturbation probabilities approach zero behavioral types may follow nonstationary strategies and respond to the opponent s play in equilibrium rational players initially choose a behavioral type to imitate and a war of attrition ensues how much should a player try to get and how should she behave while waiting for the resolution of bargaining in both respects she should build her strategy around the advice given by the nash bargaining with threats nbwt theory developed for two stage games in any perfect bayesian equilibrium she can guarantee herself virtually her nbwt payoff by imitating a behavioral type with the following simple strategy in every period ask for and accept nothing less than that player s nbwt share and while waiting for the other side to concede take the action nash recommends as a threat in his two stage game the results suggest that there are forces at work in some dynamic games that favor certain payoffs over all others this is in stark contrast to the classic folk theorems to the further folk theorems established for repeated games with two sided reputational perturbations and to the permissive results obtained in the literature on bargaining with payoffs as you go

the effect of the discount rate on depletion of exhaustible resources this paper argues that despite its widespread acceptance in the literature the basic proposition that a reduction an increase in the discount rate leads to greater conservation faster depletion of an exhaustible resource is not generally valid it shows that the effect of the discount rate on the rate of resource depletion depends on capital requirements for production of the substitute and extraction of the resource and on the size of the resource stock in fact it shows that there always exist at least two ranges of the resource stock size for which the effect is opposite to that conventionally believed

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

the taxation of nonreplenishable natural resources revisited abstract the theory of nonreplenishable resource extraction has been extended to allow for extraction costs which increase as deposits are increasingly depleted in these cases profit maximization may result in the cessation of extraction before reserves are totally exhausted the effect of various taxation policies on optimal extraction patterns in these models are derived with a few exceptions the results are that the imposition of a tax will cause operators to extract at faster rates over shorter periods of time and to reduce the total amount of ore extracted the analysis allows for an output price which increases over time

small menu costs and large business cycles a macroeconomic model of monopoly i introduction the conflict between modern neoclassical and traditional keynesian theories of the business cycle centers upon the pricing mechanism in neoclassical models prices are fully flexible they represent the continuous optimization of economic agents and the continuous intersection of supply and demand in keynesian models prices are often assumed to be sticky they do not necessarily equilibrate all markets at all times one of the reasons for the resurgence of the equilibrium approach to macroeconomics has been the absence of a theoretical underpinning for this keynesian price stickiness this note shows that sticky prices can be both privately efficient and socially inefficient the business cycle results from the suboptimal adjustment of prices in response to a demand shock to the extent that policy can stabilize aggregate demand it can mitigate the social loss due to this suboptimal adjustment in some keynesian models prices are simply exogenously fixed 2 in others agents must set their prices in advance of the transaction date the act of altering a posted price is certainly costly these costs include such items as printing new catalogs and informing salesmen of the new price yet these menu costs are small and therefore generally perceived as providing only a weak foundation for these fixed price models however this inference is flawed small menu costs can cause large welfare losses the claim that price adjustment costs are small does not rebut the claim that they are central to understanding economic fluctuations

resource taxation with heterogeneous quality and endogenous reserves abstract this paper analyzes the impact of mining taxation on the intertemporal extraction profile for a heterogeneous ore body the extraction profile specifies both quantities and qualities extracted in each period total extraction is thus endogenously determined the taxes explicitly considered are severance taxes ad valorem or per unit on metal or on ore property taxes and profits taxes with depletion allowance the intertemporal framework integrates economic and geological factors generating new results on extraction distortions and providing qualification or reconciliation of previous diverse results in this area

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

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

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