Related papers: Rising Marginal Costs, Rising Prices?
As a firm varies the price of a product, consumers exhibit reference effects, making purchase decisions based not only on the prevailing price but also the product's price history. We consider the problem of learning such behavioral…
This paper is concerned with the determination of pricing strategies for a firm that in each period of a finite horizon receives replenishment quantities of a single product which it sells in two markets, e.g., a long-distance market and an…
How much has market power increased in the United States in the last fifty years? And how did the rise in market power affect aggregate profits? Using micro-level data from U.S. Compustat, we find that several indicators of market power…
I study the limit of a large random economy, where a set of consumers invests in financial instruments engineered by banks, in order to optimize their future consumption. This exercise shows that, even in the ideal case of perfect…
We develop a theory for the market impact of large trading orders, which we call metaorders because they are typically split into small pieces and executed incrementally. Market impact is empirically observed to be a concave function of…
How does competition in markets for information affect the creation and division of surplus? We study this question in a search environment in which an agent searches sequentially for a high-quality good and learns about the quality of…
In two previous papers the author developed a second-order price adjustment (t\^atonnement) process. This paper extends the approach to include both quantity and price adjustments. We demonstrate three results: a analogue to physical…
An axiomatic approach to macroeconomics based on the mathematical structure of thermodynamics is presented. It deduces relations between aggregate properties of an economy, concerning quantities and flows of goods and money, prices and the…
Neoclassical economics has two theories of competition between profit-maximizing firms (Marshallian and Cournot-Nash) that start from different premises about the degree of strategic interaction between firms, yet reach the same result,…
Estimating market impact and transaction costs of large trades (metaorders) is a very important topic in finance. However, using models of price and trade based on public market data provide average price trajectories which are…
I examine how upstream mergers affect negotiated prices when suppliers bargain with a monopoly intermediary selling products to final consumers. Conventional wisdom holds that such transactions lower negotiated prices when the products are…
When designing product rankings, online retailers and platforms choose which outcome to maximize: revenues from commissions or markups, the number of transactions, or consumer welfare. These objectives need not align, creating potential…
In the General Theory, Keynes remarked that the economy's state depends on expectations, and that these expectations can be subject to sudden swings. In this work, we develop a multiple equilibria behavioural business cycle model that can…
An empirical study of joint bivariate probability distribution of two consecutive price increments for a set of stocks at time scales ranging from one minute to thirty minutes reveals asymmetric structures with respect to the axes y=0, y=x,…
We consider in a market model the cooperative emergence of value due to a positive feedback between perception of needs and demand. Here we consider also a negative feedback from production of the traded products, and find that this…
We extend a linear version of the liquidity risk model of Cetin et al. (2004) to allow for price impacts. We show that the impact of a market order on prices depends on the size of the transaction and the level of liquidity. We obtain a…
This paper derives the expressions of correlations between prices of two assets, returns of two assets, and price-return correlations of two assets that depend on statistical moments and correlations of the current values, past values, and…
Markets have internal dynamics leading to excess volatility and other phenomena that are difficult to explain using rational expectations models. This paper studies these using a nonequilibrium price formation rule, developed in the context…
This paper develops a new model of business cycles. The model is economical in that it is solved with an aggregate demand-aggregate supply diagram, and the effects of shocks and policies are obtained by comparative statics. The model builds…
This paper describes asset price and return disturbances as result of relations between transactions and multiple kinds of expectations. We show that disturbances of expectations can cause fluctuations of trade volume, price and return. We…