Related papers: Pass-through with Price Dispersion
This paper studies cost pass-through in differentiated-product oligopoly. I derive a general representation of the pass-through matrix that decomposes equilibrium price responses into the roles of demand curvature, substitution, and…
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…
We examine how monetary shocks spread throughout an economic model characterized by sticky prices and general equilibrium, where the pricing strategies of firms are interlinked, fostering a mutually beneficial relationship. In this dynamic…
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 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…
Using Trades and Quotes data from the Paris stock market, we show that the random walk nature of traded prices results from a very delicate interplay between two opposite tendencies: long-range correlated market orders that lead to…
Identical products being sold at different prices in different locations is a common phenomenon. Price differences might occur due to various reasons such as shipping costs, trade restrictions and price discrimination. To model such…
We solve in closed-form an equilibrium model in which a finite number of exponential investors continuously consume and trade with price-impact. Compared to the analogous Pareto-efficient equilibrium model, price-impact has an amplification…
We consider a package assignment problem with multiple units of indivisible items. The seller can specify preferences over partitions of their supply between buyers as packaging costs. We propose incremental costs together with a graph that…
Mandatory emission trading schemes are being established around the world. Participants of such market schemes are always exposed to risks. This leads to the creation of an accompanying market for emission-linked derivatives. To evaluate…
We present empirical evidence on the relationship between demand shocks and price changes, conditional on returns to scale. We find that in industries with decreasing returns to scale, demand increases (which raise costs) correspond to…
The paper proposes a class of financial market models which are based on inhomogeneous telegraph processes and jump diffusions with alternating volatilities. It is assumed that the jumps occur when the tendencies and volatilities are…
We modify the standard model of price competition with horizontally differentiated products, imperfect information, and search frictions by allowing consumers to flexibly acquire information about a product's match value during their…
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…
Data regulations increasingly enable consumers to switch among market segments, making segmentation an endogenous outcome of strategic interaction. We study a model in which consumers choose segments before a monopolist sets…
Using simple particle models of limit order markets, we argue that mid-term over-diffusive price behaviour is inherent to the very nature of these markets. Several rules for rate changes are considered. We obtain analytical results for…
A percolation model is presented, with computer simulations for illustrations, to show how the sales of a new product may penetrate the consumer market. We review the traditional approach in the marketing literature, which is based on…
We briefly review data analysis of the Island order book, part of NASDAQ, which suggests a framework to which all limit order markets should comply. Using a simple exclusion particle model, we argue that short-time price over-diffusion in…
We review the evidence that the erratic dynamics of markets is to a large extent of endogenous origin, i.e. determined by the trading activity itself and not due to the rational processing of exogenous news. In order to understand why and…
Platform giants in China have operated with persistently compressed margins in highly concentrated markets for much of the past decade, despite market shares exceeding 60\% in core segments. Standard theory predicts otherwise: either the…