Related papers: Rising Marginal Costs, Rising Prices?
This article provides a simple explanation of the asymptotic concavity of the price impact of a meta-order via the microstructural properties of the market. This explanation is made more precise by a model in which the local relationship…
In an electric power system, demand fluctuations may result in significant ancillary cost to suppliers. Furthermore, in the near future, deep penetration of volatile renewable electricity generation is expected to exacerbate the variability…
This paper develops a strategic model of trade between two regions in which, depending on the relation among output, financial resources and transportation costs, the adjustment of prices towards an equilibrium is studied. We derive…
The price of oil can rise because of a disruption to supply or an increase in demand. The nature of the price change determines the dynamic effects. As Kilian (2009) put it: "not all oil price shocks are alike." Using the latest available…
We define what "Price Impact" means, and how it is measured and modelled in the recent literature. Although this notion seems to convey the idea of a forceful and intuitive mechanism, we discuss why things might not be that simple.…
We study overpricing in a repeated game between two representative agents: a market maker, who controls market liquidity, and a market taker, who chooses trade quantities. Market prices evolve through the endogenous price impact of trades…
Whenever customers' choices (e.g. to buy or not a given good) depend on others choices (cases coined 'positive externalities' or 'bandwagon effect' in the economic literature), the demand may be multiply valued: for a same posted price,…
Economic models with input-output networks assume that firm or sector (unit) growth is driven by a weighted sum of trade partners' growth and an independently-drawn idiosyncratic shock. I show that the idiosyncratic risk assumption in a…
This paper studies the links between the descriptions of macroeconomic variables and statistical moments of market trade, price, and return. The randomness of market trade values and volumes during the averaging interval {\Delta} results in…
Consumers in many markets are uncertain about firms' qualities and costs, so buy based on both the price and the quality inferred from it. Optimal pricing depends on consumer heterogeneity only when firms with higher quality have higher…
Studies looking at electricity market designs for very high shares of wind and solar often conclude that the energy-only market will break down. Without fuel costs, it is said that there is nothing to set prices. Symptoms of breakdown…
In this comment we discuss the problem of reconciling the linear efficiency of price returns with the long-memory of supply and demand. We present new evidence that shows that efficiency is maintained by a liquidity imbalance that co-moves…
This paper takes a fresh look at the economic theory that is motivation for pricing models, such as critical peak pricing (CPP), or surge pricing, and the demand response models advocated by policy makers and in the power systems…
We develop a model where firms determine the price at which they sell their differentiable goods, the volume that they produce, and the inputs (types and amounts) that they purchase from other firms. A steady-state production network…
How and why stock prices move is a centuries-old question still not answered conclusively. More recently, attention shifted to higher frequencies, where trades are processed piecewise across different timescales. Here we reveal that price…
How do cost shocks pass through to prices in markets with price dispersion? We decompose the problem into two layers. In the competition layer, consumers' consideration sets determine equilibrium distributions of normalized margins. In the…
We study the problem of what causes prices to change. We define the mechanical impact of a trading order as the change in future prices in the absence of any future changes in decision making, and its it informational impact as the…
All economies require physical resource consumption to grow and maintain their structure. The modern economy is additionally characterized by private debt. The Human and Resources with MONEY (HARMONEY) economic growth model links these…
This paper proposes a novel method for demand forecasting in a pricing context. Here, modeling the causal relationship between price as an input variable to demand is crucial because retailers aim to set prices in a (profit) optimal manner…
Stylized facts can be regarded as constraints for any modeling attempt of price dynamics on a financial market, in that an empirically reasonable model has to reproduce these stylized facts at least qualitatively. The dynamics of market…