Related papers: Rising Marginal Costs, Rising Prices?
We introduce pricing formulas for competition and collusion models of two-sided markets with an outside option. For the competition model, we find conditions under which prices and consumer surplus may increase or decrease if the outside…
The impact of trades on asset prices is a crucial aspect of market dynamics for academics, regulators and practitioners alike. Recently, universal and highly nonlinear master curves were observed for price impacts aggregated on all…
We address the question of how stock prices respond to changes in demand. We quantify the relations between price change $G$ over a time interval $\Delta t$ and two different measures of demand fluctuations: (a) $\Phi$, defined as the…
It is still common wisdom amongst economists, politicians and lay people that economic growth is a necessity of our social systems, at least to avoid distributional conflicts. This paper challenges such belief moving from a purely physical…
Globally operating suppliers face the rising challenge of wholesale pricing under scarce data about retail demand, in contrast to better informed, locally operating retailers. At the same time, as local businesses proliferate, markets…
We demonstrated the analogy between Economics and Gauge Theory of Plasticity and used it to describe the relationship between money supply and inflation at the economic market. The received equations of economical dynamics in phase space…
Implementing a set of microeconomic criteria, we develop price dynamics equations using a function of demand/supply with key symmetry properties. The function of demand/supply can be linear or nonlinear. The type of function determines the…
The marginal price of electricity traditionally depends on the dual variables associated with relevant optimization goals. Particularly, in the optimal power flow realm, prices represent the cost of supplying an additional unit of power at…
Input-Output analysis describes the dependence of production, demand and trade between sectors and regions and allows to understand the propagation of economic shocks through economic networks. A central challenge in practical applications…
There are clear benefits associated with a particular consumer choice for many current markets. For example, as we consider here, some products might carry environmental or `green' benefits. Some consumers might value these benefits while…
We investigate possible origins of trends using a deterministic threshold model, where we refer to long-term variabilities of price changes (price movements) in financial markets as trends. From the investigation we find two phenomena. One…
Our goal in this paper is to study the market impact in a market in which the order flow is autocorrelated. We build a model which explains qualitatively and quantitatively the empirical facts observed so far concerning market impact. We…
We develop a market model in which products generate state-dependent potential hidden charges. Firms differ in their ability to realize this potential. Unlike firms, consumers do not observe the state. They try to infer hidden charges from…
It is known that the impact of transactions on stock price (market impact) is a concave function of the size of the order, but there exists little quantitative theory that suggests why this is so. I develop a quantitative theory for the…
The optimal price of each firm falls in the search cost of consumers, in the limit to the monopoly price, despite the exit of lower-value consumers in response to costlier search. Exit means that fewer inframarginal consumers remain. The…
Are large scale research programs that include many projects more productive than smaller ones with fewer projects? This problem of economy of scale is particularly relevant for understanding recent mergers in particular in the…
I study the role of industries' position in supply chains in shaping the transmission of final demand shocks. First, I use a novel shift-share design leveraging destination-specific final demand shocks and a new measure of destination…
While the long-ranged correlation of market orders and their impact on prices has been relatively well studied in the literature, the corresponding studies of limit orders and cancellations are scarce. We provide here an empirical study of…
This paper introduces and formalizes the classical view on supply and demand, which, we argue, has an integrity independent and distinct from the neoclassical theory. Demand and supply, before the marginal revolution, are defined not by an…
Risk-neutral pricing dictates that the discounted derivative price is a martingale in a measure equivalent to the economic measure. The residual ambiguity for incomplete markets is here resolved by minimising the entropy of the price…