In monopoly pricing situations, firms should optimally vary prices to learn demand. The variation must be sufficiently high to ensure complete learning. In competitive situations, however, varying prices provides information to competitors and may reduce the value of learning. Such situations may arise in the pricing of new products such as pharmaceuticals and digital goods. This paper shows that firms in competition can learn efficiently in certain equilibrium actions which involve adding noise to myopic estimation and best-response strategies. The paper then discusses how this may not be the case when actions reveal information quickly to competitors. The paper provides a setting where this effect can be strong enough to stop learning so that firms optimally reduce any variation in prices and choose not to learn demand. The result can be that the selling firms achieve a collaborative outcome instead of a competitive equilibrium. The result has implications for policies that restrict price changes or require disclosures.
{"title":"Dynamic Learning in Strategic Pricing Games","authors":"J. Birge","doi":"10.2139/ssrn.3579123","DOIUrl":"https://doi.org/10.2139/ssrn.3579123","url":null,"abstract":"In monopoly pricing situations, firms should optimally vary prices to learn demand. The variation must be sufficiently high to ensure complete learning. In competitive situations, however, varying prices provides information to competitors and may reduce the value of learning. Such situations may arise in the pricing of new products such as pharmaceuticals and digital goods. This paper shows that firms in competition can learn efficiently in certain equilibrium actions which involve adding noise to myopic estimation and best-response strategies. The paper then discusses how this may not be the case when actions reveal information quickly to competitors. The paper provides a setting where this effect can be strong enough to stop learning so that firms optimally reduce any variation in prices and choose not to learn demand. The result can be that the selling firms achieve a collaborative outcome instead of a competitive equilibrium. The result has implications for policies that restrict price changes or require disclosures.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"24 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-04-17","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"84344957","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Market forces played a negligible role in the allocation of industrial land before 2007 in China. Since 2007, the central government has launched a reform that strictly implemented two policies: 1) all the urban industrial land must be sold through public auction; 2) there is a minimum land price (MLP) constraint on industrial land transaction. This paper investigates the micro-foundations of the industrial land market in urban China post-2007. In this market, the local government as monopoly supplier auctions off industrial land in order to gather land sales revenues and boost local industrial development, subject to an MLP regulation from the central government. Using a large land-transaction data matched with county-industry-specific characteristics, our empirical analysis finds that: first, the industrial land markets have been fledging in China, fostered by the reform since 2007. Specifically, in contrast to before the reform, the industrial land sale prices become pretty responsive to both the demand factors (e.g., industry agglomeration and coagglomeration, local economic development) and the supply factors (land cost) of the market; moreover, in terms of quantity, more land is sold to industries with higher degree of specialization or concentration in a county, suggesting improved allocation efficiency. Second, local governments selectively support industries in their land supply decisions. We find that local governments tend to sell more land at lower prices to those industries that are strategically important (classified as priority industries) or that can bring higher coagglomeration externalities to a county. Third, although about 70% of land transactions in our sample are not bounded by the central government’s minimum price constraints, still the MLP constraints are binding in 55,000 land transactions amounting to a total land area of 2,824 square kilometers, and costly downward adjustments are involved there. Our analysis reveals different preferences between local governments and the central government. Compared with local governments, the central government tends to value less the coagglomeration externality in developed regions. Also the central government tends to be more concerned about the social cost of land supply than local governments in general.
{"title":"A Great New World? China’s Industrial Land Market Post-2007","authors":"Wen-Chuan Tian, Zhi Wang, Qinghua Zhang","doi":"10.2139/ssrn.3573226","DOIUrl":"https://doi.org/10.2139/ssrn.3573226","url":null,"abstract":"Market forces played a negligible role in the allocation of industrial land before 2007 in China. Since 2007, the central government has launched a reform that strictly implemented two policies: 1) all the urban industrial land must be sold through public auction; 2) there is a minimum land price (MLP) constraint on industrial land transaction. This paper investigates the micro-foundations of the industrial land market in urban China post-2007. In this market, the local government as monopoly supplier auctions off industrial land in order to gather land sales revenues and boost local industrial development, subject to an MLP regulation from the central government. Using a large land-transaction data matched with county-industry-specific characteristics, our empirical analysis finds that: first, the industrial land markets have been fledging in China, fostered by the reform since 2007. Specifically, in contrast to before the reform, the industrial land sale prices become pretty responsive to both the demand factors (e.g., industry agglomeration and coagglomeration, local economic development) and the supply factors (land cost) of the market; moreover, in terms of quantity, more land is sold to industries with higher degree of specialization or concentration in a county, suggesting improved allocation efficiency. Second, local governments selectively support industries in their land supply decisions. We find that local governments tend to sell more land at lower prices to those industries that are strategically important (classified as priority industries) or that can bring higher coagglomeration externalities to a county. Third, although about 70% of land transactions in our sample are not bounded by the central government’s minimum price constraints, still the MLP constraints are binding in 55,000 land transactions amounting to a total land area of 2,824 square kilometers, and costly downward adjustments are involved there. Our analysis reveals different preferences between local governments and the central government. Compared with local governments, the central government tends to value less the coagglomeration externality in developed regions. Also the central government tends to be more concerned about the social cost of land supply than local governments in general.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"6 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-04-10","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"85782609","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Q. Feng, Zhongjie Ma, Zhaofang Mao, J. Shanthikumar
With supply chains becoming increasingly extended, the uncertainties in the upstream production process can greatly affect the material flows that aim toward meeting the uncertain demands at the downstream. We analyze a two-location system in which the upstream production facility experiences random capacities and the downstream store faces random demands. Different from the widely used approach that seeks the decomposition of the profit function based on the echelon inventories, our approach builds on the notions of stochastic functions, in particular, the stochastic linearity in midpoint and the directionally concave order. With these notions, we establish the concavity and submodularity of the profit functions in the transformed decision variables. In general, it is optimal to follow a two-level state-dependent threshold policy such that an order is issued at a location if and only if the inventory position of that location is below the corresponding threshold. In the special case where the salvage values are linear in the ending inventories, the profit function becomes separable in the inventory positions, and the optimal policy reduces to the echelon base-stock policy. The effect of the uncertain capacity and demand depends critically on whether the production capacity is limited or ample in relation to the demand. Only when the capacity and the demand do not differ much, the upstream facility carries positive inventory; otherwise, all units produced are shipped immediately toward the downstream. We further extend our analysis to systems with general stochastic production functions and with multiple locations.
{"title":"Multi-Stage Supply Chain with Production Uncertainty","authors":"Q. Feng, Zhongjie Ma, Zhaofang Mao, J. Shanthikumar","doi":"10.2139/ssrn.3709578","DOIUrl":"https://doi.org/10.2139/ssrn.3709578","url":null,"abstract":"With supply chains becoming increasingly extended, the uncertainties in the upstream production process can greatly affect the material flows that aim toward meeting the uncertain demands at the downstream. We analyze a two-location system in which the upstream production facility experiences random capacities and the downstream store faces random demands. Different from the widely used approach that seeks the decomposition of the profit function based on the echelon inventories, our approach builds on the notions of stochastic functions, in particular, the stochastic linearity in midpoint and the directionally concave order. With these notions, we establish the concavity and submodularity of the profit functions in the transformed decision variables. In general, it is optimal to follow a two-level state-dependent threshold policy such that an order is issued at a location if and only if the inventory position of that location is below the corresponding threshold. In the special case where the salvage values are linear in the ending inventories, the profit function becomes separable in the inventory positions, and the optimal policy reduces to the echelon base-stock policy. The effect of the uncertain capacity and demand depends critically on whether the production capacity is limited or ample in relation to the demand. Only when the capacity and the demand do not differ much, the upstream facility carries positive inventory; otherwise, all units produced are shipped immediately toward the downstream. We further extend our analysis to systems with general stochastic production functions and with multiple locations.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"8 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-04-07","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"78083705","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
In a two-tier industry with bottleneck upstream and two downstream firms producing vertically differentiated goods, we identify conditions under which the upstream supplier chooses exclusive or non-exclusive negotiations, or an English auction to sell its essential input. Auctioning off a two-part tariff contract is optimal for the supplier when its bar- gaining power is low and the final goods are not too differentiated. Otherwise, the supplier enters into exclusive or non-exclusive negotiations with the downstream firm(s). Finally, in contrast to previous findings, an auction is never welfare superior to negotiations.
{"title":"Auctions vs. Negotiations in Vertically Related Markets","authors":"Emanuele Bacchiega, Oliver Bonroy, E. Petrakis","doi":"10.2139/ssrn.3569652","DOIUrl":"https://doi.org/10.2139/ssrn.3569652","url":null,"abstract":"In a two-tier industry with bottleneck upstream and two downstream firms producing vertically differentiated goods, we identify conditions under which the upstream supplier chooses exclusive or non-exclusive negotiations, or an English auction to sell its essential input. Auctioning off a two-part tariff contract is optimal for the supplier when its bar- gaining power is low and the final goods are not too differentiated. Otherwise, the supplier enters into exclusive or non-exclusive negotiations with the downstream firm(s). Finally, in contrast to previous findings, an auction is never welfare superior to negotiations.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"403 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-04-03","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"76462006","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Many operational settings share the following three features: (i) a centralized planning system allocates tasks to workers or service providers, (ii) the providers generate value by completing the tasks, and (iii) the completion of tasks influences the providers’ welfare. In such cases, the planning system’s allocations often entail trade-offs between the service providers’ welfare and the total value that is generated (or that accrues to the system itself), and concern arises that allocations that are good under one metric may perform poorly under the other. We propose a broad framework for quantifying the magnitude of value losses when allocations are restricted to satisfy certain desirable guarantees to the service providers. We consider a general class of guarantees that includes many considerations of practical interest arising (e.g., in the design of sustainable two-sided markets) in workforce welfare and compensation, or in sourcing and payments in supply chains, among other application domains. We derive tight bounds on the relative value loss and show that this loss is limited for any restriction included in our general class. Our analysis shows that when many providers are present, the largest losses are driven by fairness considerations, whereas when few providers are present, they are driven by the heterogeneity in the providers’ effectiveness to generate value; when providers are perfectly homogenous, the losses never exceed 50%. We study additional loss drivers and find that less variability in the value of jobs and a more balanced supply-demand ratio may lead to larger losses. Lastly, we demonstrate numerically using both real-world and synthetic data that the loss can be small in several cases of practical interest. This paper was accepted by Chung Piaw Teo, optimization.
{"title":"Value Loss in Allocation Systems with Provider Guarantees","authors":"Y. Gur, D. Iancu, Xavier S. Warnes","doi":"10.2139/ssrn.3351509","DOIUrl":"https://doi.org/10.2139/ssrn.3351509","url":null,"abstract":"Many operational settings share the following three features: (i) a centralized planning system allocates tasks to workers or service providers, (ii) the providers generate value by completing the tasks, and (iii) the completion of tasks influences the providers’ welfare. In such cases, the planning system’s allocations often entail trade-offs between the service providers’ welfare and the total value that is generated (or that accrues to the system itself), and concern arises that allocations that are good under one metric may perform poorly under the other. We propose a broad framework for quantifying the magnitude of value losses when allocations are restricted to satisfy certain desirable guarantees to the service providers. We consider a general class of guarantees that includes many considerations of practical interest arising (e.g., in the design of sustainable two-sided markets) in workforce welfare and compensation, or in sourcing and payments in supply chains, among other application domains. We derive tight bounds on the relative value loss and show that this loss is limited for any restriction included in our general class. Our analysis shows that when many providers are present, the largest losses are driven by fairness considerations, whereas when few providers are present, they are driven by the heterogeneity in the providers’ effectiveness to generate value; when providers are perfectly homogenous, the losses never exceed 50%. We study additional loss drivers and find that less variability in the value of jobs and a more balanced supply-demand ratio may lead to larger losses. Lastly, we demonstrate numerically using both real-world and synthetic data that the loss can be small in several cases of practical interest. This paper was accepted by Chung Piaw Teo, optimization.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"16 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-03-24","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"81204758","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper presents an examination of optimal revenue management of a monopoly auction house through which a seller sells goods via a second-price auction. The house charges commissions to both the buyer and seller. Results demonstrate that a continuum of combinations of optimal buyer and seller commission rates exists, all of which yield the same expected profit of the auction house. Additionally, we discuss several possible factors that lead to the prevailing custom of zero buyer commission, such as commission aversion of buyers, the auction house’s incentive to maximize the hammer price, and seller and buyer preferences for apparently lowered commission rates.
{"title":"Neutrality of Buyer and Seller Commissions to Auction House Profit","authors":"Toshihiro Tsuchihashi, Yusuke Zennyo","doi":"10.2139/ssrn.3557777","DOIUrl":"https://doi.org/10.2139/ssrn.3557777","url":null,"abstract":"This paper presents an examination of optimal revenue management of a monopoly auction house through which a seller sells goods via a second-price auction. The house charges commissions to both the buyer and seller. Results demonstrate that a continuum of combinations of optimal buyer and seller commission rates exists, all of which yield the same expected profit of the auction house. Additionally, we discuss several possible factors that lead to the prevailing custom of zero buyer commission, such as commission aversion of buyers, the auction house’s incentive to maximize the hammer price, and seller and buyer preferences for apparently lowered commission rates.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"1 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-03-20","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"89588594","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Este trabajo realiza una estimacion de la Productividad Total Factorial para 11 departamentos y 20 divisiones industriales en Colombia durante el periodo 2012-2016, utilizando informacion de la Encuesta Anual Manufacturera del DANE y usando el metodo semi-parametrico propuesto por Levinsohn y Petrin (2003) para este fin. Los resultados muestran que los departamentos de Bolivar, Bogota, Cundinamarca y Antioquia presentaron niveles de productividad superiores a la media nacional, mientras Valle del Cauca, Cauca y Tolima, fueron los de mas bajo desempeno. En cuanto a sectores industriales, se destacan los altos niveles de productividad en la produccion de farmaceuticos y sustancias quimicas medicinales; aparatos y equipo electrico y fabricacion de sustancias y productos quimicos. Por el contrario, sectores tradicionales como fabricacion de productos textiles, elaboracion de alimentos, productos metalurgicos basicos y elaboracion de bebidas, presentaron bajos niveles de productividad, comparado con la media nacional. Estos resultados ponen de relieve la importancia de desarrollar politicas publicas focalizadas en aquellos sectores promisorios y regiones mas relegadas, como manera de impulsar el desarrollo industrial y cerrar las brechas de ingresos y calidad de vida entre regiones.
{"title":"Una estimación de la Productividad Total Factorial en Colombia a nivel de departamentos y divisiones industriales (An estimate of Total Factorial Productivity in Colombia at the level of departments and industrial divisions)","authors":"Mateo Andrés Rivera-Arbeláez, A. Torres","doi":"10.2139/ssrn.3552706","DOIUrl":"https://doi.org/10.2139/ssrn.3552706","url":null,"abstract":"Este trabajo realiza una estimacion de la Productividad Total Factorial para 11 departamentos y 20 divisiones industriales en Colombia durante el periodo 2012-2016, utilizando informacion de la Encuesta Anual Manufacturera del DANE y usando el metodo semi-parametrico propuesto por Levinsohn y Petrin (2003) para este fin. Los resultados muestran que los departamentos de Bolivar, Bogota, Cundinamarca y Antioquia presentaron niveles de productividad superiores a la media nacional, mientras Valle del Cauca, Cauca y Tolima, fueron los de mas bajo desempeno. En cuanto a sectores industriales, se destacan los altos niveles de productividad en la produccion de farmaceuticos y sustancias quimicas medicinales; aparatos y equipo electrico y fabricacion de sustancias y productos quimicos. Por el contrario, sectores tradicionales como fabricacion de productos textiles, elaboracion de alimentos, productos metalurgicos basicos y elaboracion de bebidas, presentaron bajos niveles de productividad, comparado con la media nacional. Estos resultados ponen de relieve la importancia de desarrollar politicas publicas focalizadas en aquellos sectores promisorios y regiones mas relegadas, como manera de impulsar el desarrollo industrial y cerrar las brechas de ingresos y calidad de vida entre regiones.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"215 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-03-11","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"83616842","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We derive bounds for profitable manipulation of a constant product market used as a reference provider (oracle) for a margin position. Such bounds exist in terms of limits imposed on deposits the constant product market and the margin position, and depend on the elasticity of the underlying spot market.
{"title":"Are Constant Product Market Oracles Safe?","authors":"Joseph Clark","doi":"10.2139/ssrn.3538932","DOIUrl":"https://doi.org/10.2139/ssrn.3538932","url":null,"abstract":"We derive bounds for profitable manipulation of a constant product market used as a reference provider (oracle) for a margin position. Such bounds exist in terms of limits imposed on deposits the constant product market and the margin position, and depend on the elasticity of the underlying spot market.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"138 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-03-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86277784","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Domestic sugar demand is important to know as Indonesia now has been the largest economics country in South East Asia. With the world's fourth largest population, Indonesia's sugar demand is certainly fascinating. Therefore, research is needed, what factors influence the demand for Indonesian sugar. The research used secondary data from BPS, USDA, FAO, World Bank, AGI, from 1983 – 2013, processed by SAS version 9. The results of this study showed, demand for sugar in Indonesia is affected by sugar price, population, and the level of income and demand for sugar in the previous year. Estimated price parameters obtained to demand is 199,762 and the sugar category is from elasticity of demand sugar is very elastic. Estimated population parameter is 0.010763. Estimated level of income parameters for sugar demand is equal to - 0.017 and the sugar category from the elasticity of sugar demand to the level income is inelastic.
国内糖的需求很重要，因为印尼现在是东南亚最大的经济体。作为世界第四大人口大国，印尼对糖的需求无疑令人着迷。因此，有必要研究是什么因素影响了印尼糖的需求。该研究使用的二手数据来自BPS、USDA、FAO、World Bank、AGI，时间为1983 - 2013年，由SAS version 9处理。本研究结果表明，印尼食糖需求受食糖价格、人口、前一年收入水平和食糖需求的影响。估计价格参数得到的需求是199,762和糖的类别是从需求弹性糖是非常有弹性的。估计总体参数为0.010763。食糖需求的收入参数估计水平等于- 0.017，食糖类别从食糖需求弹性到收入水平是非弹性的。
{"title":"Demand of Indonesian Sugar","authors":"Dyana Sari","doi":"10.2139/ssrn.3549196","DOIUrl":"https://doi.org/10.2139/ssrn.3549196","url":null,"abstract":"Domestic sugar demand is important to know as Indonesia now has been the largest economics country in South East Asia. With the world's fourth largest population, Indonesia's sugar demand is certainly fascinating. Therefore, research is needed, what factors influence the demand for Indonesian sugar. The research used secondary data from BPS, USDA, FAO, World Bank, AGI, from 1983 – 2013, processed by SAS version 9. The results of this study showed, demand for sugar in Indonesia is affected by sugar price, population, and the level of income and demand for sugar in the previous year. Estimated price parameters obtained to demand is 199,762 and the sugar category is from elasticity of demand sugar is very elastic. Estimated population parameter is 0.010763. Estimated level of income parameters for sugar demand is equal to - 0.017 and the sugar category from the elasticity of sugar demand to the level income is inelastic.","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"30 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-03-05","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"86159927","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Pub Date : 2020-03-01DOI: 10.5709/ce.1897-9254.333
Friedrich L. Sell
Luigi Barone’s famous curve offers an excellent framework for the study of the microeconomic and macroeconomic implications of innovation and imitation. However, neither Barone nor his epigones have been able to sufficiently “exploit” his contribution to date. Complementing his analysis of supply (covering unit costs and marginal costs of production) to the forces of aggregate demand provided by the macroeconomic aggregate demand–aggregate supply model (AS-AD) analysis would be required in order to identify the determinants of the equilibrium price level in the economy. Moreover, a dynamic interpretation (provided by an inhomogeneous difference equation of the second order) of Barone’s key economic growth factors (innovation and imitation) makes it easier to identify the cyclical properties of the macroeconomic price changes. These cyclical price movements have proven to be empirically relevant in the case of Germany (2000–2017), while patent record (as an indicator for the occurrence of innovation) appears to follow a random walk (Germany, 2000–2017).
{"title":"Static and Dynamic Price Effects Motivated by Innovation and Imitation: Novel Insights Using the Barone’s Curve","authors":"Friedrich L. Sell","doi":"10.5709/ce.1897-9254.333","DOIUrl":"https://doi.org/10.5709/ce.1897-9254.333","url":null,"abstract":"Luigi Barone’s famous curve offers an excellent framework for the study of the microeconomic and macroeconomic implications of innovation and imitation. However, neither Barone nor his epigones have been able to sufficiently “exploit” his contribution to date. Complementing his analysis of supply (covering unit costs and marginal costs of production) to the forces of aggregate demand provided by the macroeconomic aggregate demand–aggregate supply model (AS-AD) analysis would be required in order to identify the determinants of the equilibrium price level in the economy. Moreover, a dynamic interpretation (provided by an inhomogeneous difference equation of the second order) of Barone’s key economic growth factors (innovation and imitation) makes it easier to identify the cyclical properties of the macroeconomic price changes. These cyclical price movements have proven to be empirically relevant in the case of Germany (2000–2017), while patent record (as an indicator for the occurrence of innovation) appears to follow a random walk (Germany, 2000–2017).","PeriodicalId":18516,"journal":{"name":"Microeconomics: Production","volume":"44 1","pages":""},"PeriodicalIF":0.0,"publicationDate":"2020-03-01","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"80248159","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
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