Related papers: Rising Marginal Costs, Rising Prices?
We study a large economy in which firms cannot compute exact solutions to the non-linear equations that characterize the equilibrium price at which they can sell future output. Instead, firms use polynomial expansions to approximate prices.…
How does supply uncertainty affect the structure of supply chain networks? To answer this question we consider a setting where retailers and suppliers must establish a costly relationship with each other prior to engaging in trade.…
The primary concerns of this paper are twofold: to understand the economic value of storage in the presence of ramp constraints and exogenous electricity prices, and to understand the implications of the associated optimal storage…
In this chapter we review some recent results on the dynamics of price formation in financial markets and its relations with the efficient market hypothesis. Specifically, we present the limit order book mechanism for markets and we…
We study the cause of large fluctuations in prices in the London Stock Exchange. This is done at the microscopic level of individual events, where an event is the placement or cancellation of an order to buy or sell. We show that price…
Empirical evidence suggests that even the most competitive markets are not strictly efficient. Price histories can be used to predict near future returns with a probability better than random chance. Many markets can be considered as {\it…
We use standard physics techniques to model trading and price formation in a market under the assumption that order arrival and cancellations are Poisson random processes. This model makes testable predictions for the most basic properties…
During a stock market peak the price of a given stock ($ i $) jumps from an initial level $ p_1(i) $ to a peak level $ p_2(i) $ before falling back to a bottom level $ p_3(i) $. The ratios $ A(i) = p_2(i)/p_1(i) $ and $ B(i)= p_3(i)/p_1(i)…
Triangle fees are a novel fee structure for AMMs, in which marginal fees are decreasing in a trade's size. That decline is proportional to the movement in the AMM's implied price, i.e. for every basis point the trade moves the ratio of…
We discuss price competition when positive network effects are the only other factor in consumption choices. We show that partitioning consumers into two groups creates a rich enough interaction structure to induce negative marginal demand…
Traders constantly consider the price impact associated with changing their positions. This paper seeks to understand how price impact emerges from the quoting strategies of market makers. To this end, market making is modeled as a dynamic…
Most finance studies are discussed on the basis of several hypotheses, for example, investors rationally optimize their investment strategies. However, the hypotheses themselves are sometimes criticized. Market impacts, where trades of…
Global oil price is an important factor in determining many economic variables in the world's economy. It is generally modeled as a stochastic process and have been studied through different techniques by comparing the historic time series…
It is widely assumed that increases in economic productivity necessarily lead to economic growth. In this paper, it is shown that this is not always the case. An idealized model of an economy is presented in which a new technology allows…
Energy system models for long-term planning are widely used to explore the future electricity system. Typically, to represent the future electricity demand in these models, historical demand profiles are used directly or scaled up linearly.…
We introduce a stochastic price model where, together with a random component, a moving average of logarithmic prices contributes to the price formation. Our model is tested against financial datasets, showing an extremely good agreement…
The relationship between demand and prices of a set of products can be modeled as a linear mapping from logarithmic price changes to logarithmic changes in demand. We consider the problem of estimating the coefficient matrix of this…
Assessing the contribution of various risk factors to future inflation risks was crucial for guiding monetary policy during the recent high inflation period. However, existing methodologies often provide limited insights by focusing solely…
Although recent studies have shown that electricity systems with shares of wind and solar above 80% can be affordable, economists have raised concerns about market integration. Correlated generation from variable renewable sources depresses…
We consider a simple model of rational agents competing in a single product market described by simple linear demand curve. Contrary to accepted economic theory, the agents' production levels synchronise in the absence of conscious…