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Market Equilibrium (market + equilibrium)
Selected AbstractsRelative Performance Evaluation Contracts and Asset Market Equilibrium,THE ECONOMIC JOURNAL, Issue 506 2005Sandeep Kapur We analyse the equilibrium consequences of performance-based contracts for fund managers. Managerial remuneration is tied to a fund's absolute and relative performance. Investors choose whether or not to delegate their investment to better-informed fund managers; if they delegate they choose the optimal contract subject to the fund manager's participation constraint. We find that the impact of relative performance evaluation on the equilibrium equity premium and on portfolio herding critically depends on whether the participation constraint is binding. Simple numerical examples suggest that the increased importance of delegation and relative performance evaluation may lower the equity premium. [source] Exchange Rate Volatility and Democratization in Emerging Market CountriesINTERNATIONAL STUDIES QUARTERLY, Issue 2 2003Jude C. Hays We examine some of the consequences of financial globalization for democratization in emerging market economies by focusing on the currency markets of four Asian countries at different stages of democratic development. Using political data of various kinds,including a new events data series,and the Markov regime switching model from empirical macroeconomics, we show that in young and incipient democracies politics continuously causes changes in the probability of experiencing two different currency market equilibria: a high volatility "contagion" regime and a low volatility "fundamentals" regime. The kind of political events that affect currency market equilibration varies cross-nationally depending on the degree to which the polity of a country is democratic and its policymaking transparent. The results help us better gauge how and the extent to which democratization is compatible with financial globalization. [source] Private road competition and equilibrium with traffic equilibrium constraintsJOURNAL OF ADVANCED TRANSPORTATION, Issue 1 2009Hai Yang Abstract Toll road competition is one of the important issues under a build-operate-transfer (BOT) scheme, which is being encountered nowadays in many cities. When there are two or more competing firms and each firm operates a competitive toll road, their profits are interrelated due to the competitors' choices and demand inter-dependence in the network. In this paper we develop game-theoretic approaches to the study of the road network, on which multiple toll roads are operated by competitive private firms. The strategic interactions and market equilibria among the private firms are analyzed both in determining their supply (road capacity) and price (toll level) over the network. The toll road competition problems in general traffic equilibrium networks are formulated as an equilibrium program with equilibrium constraints or bi-level variational inequalities. Heuristic solution methods are proposed and their convergences are demonstrated with simple network examples. It is shown that private pricing and competition can be both profitable and welfare-improving. [source] Personal Income Distribution and Market StructureGERMAN ECONOMIC REVIEW, Issue 3 2002Corrado Benassi Income distribution affects market demand and its elasticity, and, as a consequence, the optimal behaviour of firms and market equilibrium. This paper focuses on the effects of income polarization, and presents a model where , for any unimodal density function describing income distribution of the consumers , income polarization leads to market concentration, i.e., to a smaller number of firms able to survive in the long run, provided that the firms' fixed costs are sufficiently low. [source] Do share prices matter?ACCOUNTING & FINANCE, Issue 3 2002Edward A. Dyl This paper examines whether the cross sectional variation in Australian share prices is partially explained by measures of firm size and ownership characteristics in a manner that is consistent with firms behaving in accordance with Merton's (1987) model of capital market equilibrium with incomplete information. Based on a sample of firms whose shares were traded on the ASX during 1995, we show that firms largely owned by less wealthy shareholders tend to have low stock prices, although this relation is not linear. In addition, larger, better,known, firms tend to have higher stock prices. These findings are consistent with prior evidence from US markets, and suggest the existence of a shareholder clientele effect in Australia that is related to the share price of the underlying firm. [source] Pricing Access to a Monopoly InputJOURNAL OF PUBLIC ECONOMIC THEORY, Issue 4 2004David S. Sibley What price should downstream entrants pay a vertically integrated incumbent monopoly for use of its assets? Courts, legislators, and regulators have at times mandated that incumbent monopolies lease assets required for the production of a retail service to entrants in efforts to increase the competitiveness of retail markets. This paper compares two rules for pricing such monopoly inputs: marginal cost pricing (MCP) and generalized efficient component pricing rule (GECPR). The GECPR is not a fixed price, but is a rule that determines the input price to be paid by the entrant from the entrant's retail price. Comparing the retail market equilibrium under MCP and GECPR, the GECPR leads to lower equilibrium retail prices. If the incumbent is less efficient than the entrant, the GECPR also leads to lower production costs than does the MCP rule. If the incumbent is more efficient than the entrant, however, conditions may exist in which MCP leads to lower production costs than does the GECPR. The analysis is carried out assuming either Bertrand competition, quantity competition, or monopolistic competition between the incumbent and entrant in the downstream market. [source] A Spatial Economic Analysis of Urban Land Use and Obesity,JOURNAL OF REGIONAL SCIENCE, Issue 3 2005Andrew J. Plantinga Households maximize utility defined over housing, weight, and food subject to a fixed time budget allocated to commuting, calorie expenditure, and work. Our model explains the observed correspondence between high obesity rates and low development densities, but implies that these are determined endogenously in a spatial market equilibrium. We study the sorting of residents by attributes such as income, initial weight, and weight preferences, and examine the impacts on weight and density of urban design modifications that lower the costs of calorie expenditure. [source] Sales by multi-product retailersMANAGERIAL AND DECISION ECONOMICS, Issue 4 2006Timothy J. Richards This paper examines the rationale underlying periodic price promotions, or sales, for perishable food products by supermarket retailers. Whereas previous studies explain sales in a single-product context as arising from informational, storage cost, or demand heterogeneity, this study focuses on the central role of retailers as multi-product sellers of complementary goods. By offering a larger number of discounted products within a particular category, retailers are able to attract a sufficient number of customers to offset the effect of lower margins on sale items by selling more high-margin items. The implications that emerge from the resulting mixed-strategy equilibrium are tested in a product-level, retail-scanner data set of fresh fruit sales. Hypotheses regarding the rationale and effectiveness of sales are tested by estimating econometric models that describe (1) the number of sales items per store, (2) the depth of a given sale, and (3) promotion effectiveness on store-level demand. The results of this econometric analysis support the hypothesis that the breadth and depth of price promotions are complementary marketing tools, thus explaining how EDLP and HI-LO store formats can exist in the same monopolistically competitive market equilibrium. Copyright © 2006 John Wiley & Sons, Ltd. [source] A MODEL OF MONOPOLISTIC COMPETITION WITH PERSONAL INCOME DISPERSIONMETROECONOMICA, Issue 3 2005Corrado Benassi ABSTRACT We introduce non-homothetic preferences in the Dixit,Stiglitz model of monopolistic competition, and enquire about the effects of a change in income dispersion on the firms' optimal decisions and market equilibrium. Income dispersion, modeled as a mean preserving spread, is shown to affect only the degree of product differentiation under the standard negligibility hypothesis on the firms' decision making process, while it generates a positive co-movement of demand and demand elasticity, when this assumption is removed and the price index effect is taken into account. [source] Are Judgment Errors Reflected in Market Prices and Allocations?THE JOURNAL OF FINANCE, Issue 3 2004Experimental Evidence Based on the Monty Hall Problem The question of whether individual judgment errors survive in market equilibrium is an issue that naturally lends itself to experimental analysis. Here, the Monty Hall problem is used to detect probability judgment errors both in a cohort of individuals and in a market setting. When all subjects in a cohort made probability judgment errors, market prices also reflected the error. However, competition among two bias-free subjects was sufficient to drive prices to error-free levels. Thus, heterogeneity in behavior can be an important factor in asset pricing, and further, it may take few bias-free traders to make asset prices bias-free. [source] Clearly Irrational Financial Market Behavior: Evidence from the Early Exercise of Exchange Traded Stock OptionsTHE JOURNAL OF FINANCE, Issue 1 2003Allen M. Poteshman This paper analyzes the early exercise of exchange-traded options by different classes of investors over the 1996 to 1999 period. A large number of exercises are identified as clearly irrational without invoking any model of market equilibrium. Customers of discount brokers and customers of full-service brokers both engage in a significant number of irrational exercises while traders at large investment houses exhibit no irrational early exercise behavior. Rational and irrational exercise is triggered for discount and full-service customers by the underlying stock price attaining its highest level over the past year and by high returns on the underlying stock. [source] Futures market equilibrium under Knightian uncertaintyTHE JOURNAL OF FUTURES MARKETS, Issue 7 2003Donald Lien This paper examines the effects of Knightian uncertainty on a commodity futures market within the Newbery-Stiglitz framework. It is shown that Knightian traders act more conservatively. In a partial trade equilibrium, risk aversion and Knightian uncertainty have qualitatively similar effects on the equilibrium price and the equilibrium trading volume. Full-trade and no-trade equilibria are likely to prevail when the producer and the speculator incur different Knightian uncertainty. Herein different impacts of risk aversion and Knightian uncertainty are observed. © 2003 Wiley Periodicals, Inc. Jrl Fut Mark 23:701,718, 2003 [source] TASTE FOR VARIETY AND OPTIMUM PRODUCT DIVERSITY IN AN OPEN ECONOMYBULLETIN OF ECONOMIC RESEARCH, Issue 2 2009Javier Coto-Martínez D43; F12 ABSTRACT We extend the Benassy,taste for variety' model to an open economy setting. With the Benassy effect, the market equilibrium is inefficient, openness reduces the varieties provided in the unconstrained optimum and there are potential gains from international coordination. [source] | |||||||||||||||||||||||||