Related papers: Rising Marginal Costs, Rising Prices?
A deterministic trading strategy can be regarded as a signal processing element that uses external information and past prices as inputs and incorporates them into future prices. This paper uses a market maker based method of price…
In a market with transaction costs, the price of a derivative can be expressed in terms of (preconsistent) price systems (after Kusuoka (1995)). In this paper, we consider a market with binomial model for stock price and discuss how to…
Financial markets convert the incremental arrival of information into asset price changes. In a sandpile model grains of sand represent bits of data, and the size of an avalanche, governed by a scaling law, is linked to price volatility.…
In this paper, we examine in an abstract framework, how a tradeoff between efficiency and robustness arises in different dynamic oligopolistic market architectures. We consider a market in which there is a monopolistic resource provider and…
We show that the cost of market orders and the profit of infinitesimal market-making or -taking strategies can be expressed in terms of directly observable quantities, namely the spread and the lag-dependent impact function. Imposing that…
The contradiction between physical and economical sciences concerning the growth of the production/consumption mechanism is analyzed. It is then shown that if one wishes to keep the security level stable or to enhance it in a growing…
Algorithmic pricing is increasingly shaping market competition, raising concerns about its potential to compromise competitive dynamics. While prior work has shown that reinforcement learning (RL)-based pricing algorithms can lead to tacit…
We show that when firms compete via supply functions, transferring high-cost capacity to the largest, most efficient firm--thereby diversifying its production technologies while increasing concentration--can lower prices by prompting the…
We prove the existence of an equilibrium in a model with transaction costs and price impact where two agents are incentivized to trade towards a target. The two types of frictions -- price impact and transaction costs -- lead the agents to…
This paper addresses the structure and dynamics of an open market economy and its relations with the real interest rate. In this respect, the paper is situated within a broad conventional literature. However, it departs from the standard…
We document the rise of negative earnings between 1980 and 2019: a secular increase in the percent of firms reporting losses, both among public firms and in the broader universe of US corporations, and a secular increase in the persistence…
A microeconomic approach is proposed to derive the fluctuations of risky asset price, where the market participants are modeled as prospect trading agents. As asset price is generated by the temporary equilibrium between demand and supply,…
The distribution of price returns for a class of uncorrelated diffusive dynamics is considered. The basic assumptions are (1) that there is a "consensus" value associated with a stock, and (2) that the rate of diffusion depends on the…
The correct understanding of commodity price dynamics can bring relevant improvements in terms of policy formulation both for developing and developed countries. Agricultural, metal and energy commodity prices might depend on each other:…
When analyzing the components influencing the stock prices, it is commonly believed that economic activities play an important role. More specifically, asset prices are more sensitive to the systematic economic news that impose a pervasive…
The purpose of this paper is to provide a micro-economic foundation for an argument that the direct employment by the government is more desirable than the government purchase of private goods to eliminate unemployment. A general…
We present a dynamical theory of asset price bubbles that exhibits the appearance of bubbles and their subsequent crashes. We show that when speculative trends dominate over fundamental beliefs, bubbles form, leading to the growth of asset…
The article examines how institutions, automation, unemployment and income distribution interact in the context of a neoclassical growth model where profits are interpreted as a surplus over costs of production. Adjusting the model to the…
We test the predictions of the sticky information model using a survey dataset by comparing shoppers accuracy in recalling the prices of regulated and comparable unregulated products. Because regulated product prices are capped, they are…
We empirically analyze the price and liquidity responses to trade signs, traded volumes and signed traded volumes. Utilizing the singular value decomposition, we explore the interconnections of price responses and of liquidity responses…