Showing papers on "Factor price published in 2018"

Optimal two-level piecewise-constant price discrimination for a storable perishable product

Abstract: Price differentiation over time is an additional policy that firms might consider when determining prices for perishable products. The common policy of a fixed price regardless of freshness might result in leaving some expired inventory unsold. Price differentiation can impact the demand for perishable products, which declines as the expiration date approaches. We develop an optimisation model with the goal of evaluating the monetary effectiveness of the strategy of simultaneously combining price discrimination across heterogeneous consumers with price differentiation over time for perishable inventory under separable multiplicative demand factors of price and time. Necessary optimality equations are derived, and their solutions are proved to constitute a unique global optimal solution. It is proved that an optimal pricing policy is to implement price discrimination with respect to consumers’ sensitivity to freshness, while dynamically changing the price over time, starting with a lower price at the early...

Outsourcing, factor prices and skill formation in countries with non-overlapping time zones

Abstract: Time zone difference induced changes in trade and factor prices are relatively new concerns in trade literature. Here in this paper, we formulate a trade model capturing the issue of time zone difference and communication technology revolution together to show that due to these developments skilled workers benefit. Though wage inequality between skilled and unskilled workers is widened under reasonable and, of course, sensible condition. Return to capital dwindles while educational capital gets relatively high return. These changes also attract educational capital from abroad and eventually alter the sectoral composition of the economy in favor of more skill based one. One interesting implication of our results points to a provocative choice problem for the country concerned regarding high wage disparity and low skill formation which itself is a question of political economy.

Do price limits help control stock price volatility

Abstract: On the negative side, price limits are criticized for increasing stock price volatility and hindering the price discovery process. On the positive side, price limits are argued to give panicky investors additional time to reassess their judgments and thus provide an opportunity for correcting the element of overreaction in pricing stocks. This study analyzes the effectiveness of price limits in Borsa Istanbul by utilizing a propensity-matched control sample in addition to the traditional benchmarks used in the literature. Similar to recent research, we find strong evidence that price limits lead to increased and persistent price volatility and decreased liquidity. We also provide evidence that price limits interfere with the price discovery process. Results show that smaller stocks with larger volatility and higher trading volume are more likely to experience limit hits. Furthermore, the difference in the findings from the matched control sample and the traditional benchmarks points out the importance of accounting for firm- and market-related characteristics when analyzing the effect of price limits.

Price competition or price leadership

Abstract: Every now and then, we observe a fierce price war in a real world market, through which competing firms, selling a homogenous product, end up with Bertrand-like price competition. Despite this, not much has been known in the existing literature as to why a price competition market is formed. We address this question in the context of a choice between engaging in price competition and holding a price leader. Focusing on a duopoly market, we demonstrate that if the market is tight (or if the relative size of demand to supply exceeds a threshold value) and if the cost differential between firms is reasonably large, duopoly firms choose to engage in price competition. Otherwise, one firm becomes a price leader while the other firm a price follower.

Factor Price Distortion, Technological Innovation Pattern and the Biased Technological Progress of Industry in China: An Empirical Analysis Based on Mediating Effect Model

Abstract: This paper constructs the influencing factors system of industrial technological progress bias in China using the mediating effect model, through introducing the two indexes of factor price distortion and technological innovation pattern. The result shows that at present, the direction of technological progress of China’s industry is capital biased, which will adversely affect the income distribution and industrial upgrading. In recent years, the factor price of China’s industry has a negative distortion, and the degree of distortion has not been effectively curbed. Technological progress bias and the distortion degree of factor price are both affected by industry factor intensity. The distortion of factor price leads to the bias of technological progress towards the capital through direct or indirect effects, in which the mediating effect of technology innovation accounts for 23% of the total effect. The introduction of technology innovation mode will increase the capital biased technological progress. Therefore, it is necessary to actively promote the reform of marketization of factors and enhance the ability of independent innovation to optimize the direction of China’s industrial technological progress.

Asymmetric Effect of State-owned Enterprises on Factor Price Distortion

Abstract: The lag of factor market reform is a prominent problem in China’s reform process, and the negative distortion of factor prices is an important performance. This paper studies the causes of factor price distortion from the perspective of state-owned enterprises. On the one hand, financial repression and ownership discrimination have caused state-owned enterprises to acquire a large amount of capital at below-market prices. It implies that, when the proportion of state-owned enterprises increases, the price of capital decreases, thereby intensifying negative distortion of capital price. On the other hand, state-owned enterprises have the ability and the incentives to pay higher wages to employees, possibly improving negative distortion of labor price instead. The first reason is that, because the state-owned enterprises take the multi-tasks, like maintaining social security and improving the income distribution, the governments provide the subsidies, protection and preferential policies for the SOEs in order to make up for their losses, thus making the SOEs face less competitive pressure. The second reason is governance structure of state-owned enterprises. In SOEs, the managers are more likely to form alliances with employees and pay higher wages to them. From this point of view, the SOEs may reduce the negative distortion in labor price. In order to test the hypotheses above, this paper first measures the distortion of capital price and labor price in 171 three-digit industries using C-D production function method and the China Industrial Enterprise Database. The results show that, the prices of capital and labor are depressed in most of the industries, and the distortion of capital price is more serious than labor price, and both the distortion of capital price and labor price has an upward tendency within the sample period from 1998 to 2007. Then we analyze the effect of state-owned enterprises on factor price distortion by using two-way fixed effect model. The regression results show that the impact of the proportion of state-owned enterprises on factor price distortion is asymmetric, that is, the higher the proportion of state-owned enterprises is, the more serious negative distortion of capital price is, but the negative distortion of labor price is smaller. Even after changing the measurement of the proportion of SOEs, the results are still robust. In order to deal with the endogenous problem, we choose the average age of firms within industries as the instrument variable for the proportion of state-owned enterprises, and the results are the same as the baseline regressions. As Hsieh and Klnow （2009） used 10% as the capital price, we calculate the distortion of capital price by using their data and repeat the OLS regression and IV regression, and the above results still exist. This paper has important policy implications. Although the role of state-owned enterprises in improving the income of laborers is worthy of recognition, it is still necessary to reduce the proportion of state-owned enterprises in competitive industries, as the negative effect of SOEs on the distortion of capital price is much bigger than the positive effect of SOEs on the distortion of labor price. And the other effective ways to eliminate the distortion include deepening the reform of mixed ownership in SOEs, accelerating the reform of financial market, promoting free flow of labor, reducing government subsidies and protection to state-owned enterprises, and expanding opening-up. Those will help to optimize the allocation of resources to improve the overall welfare level of society.

A General Theory Review

Abstract: Chapter 1 reviews literatures on agricultural growth and China’s food sector performance chronologically from classical economics to neoclassical economics. Neoclassical paradigm relies on some critical hypotheses such as ‘instant market clearance’, ‘relative factor price change-induced factor flow’ and ‘perfect market institutions’. This chapter raises key research questions that, if critical hypotheses do not hold in East Asia’s empirical studies, indicate how technology change could happen under complex market institutions and in what form.

Hydropower reservoir management using multi-factor price model and correlation between price and local inflow

Abstract: Hydropower producers with reservoir capacity have a special challenge when it comes to weighing the short-term profit from selling power in the day-ahead spot market against waiting for better electricity prices. In this paper, we propose a medium-term scheduling model for a price-taking hydropower producer, using a horizon of two years. We use the price of forward contracts to forecast future spot prices, and use multiple factors to describe movements in price. Further, we include a short-term correlation between movements in electricity price and local inflow. Our main contribution is a comparison of the performance of our scheduling model to a model in which price and local inflow are assumed to be independent and a model in which price movements are described using only one factor. We quantify the loss in expected revenues of using the latter two models compared to ours when price movements are in fact driven by multiple factors and correlated with local inflow. In both cases, we find the loss to be approximately 2-3 %. We have based our study on a Norwegian hydropower plant.

The Empirical Study of House-price Fluctuations on the Impact of Total Factor Productivity of Manufacturing in China—Based on the Perspective of Misallocation of Resources

Abstract: The paper establishes theoretical and empirical model that measured and analyzed the impact of distortions of factor price, caused by irrational prosperity of China’s real estate, on misallocation of capital, labor and distortion of overall TFP in manufacturing enterprises during the periods of 2007 to 2016. The main conclusions obtained are at followings: 1) Manufacturing enterprises had significant and varying degree of distortions of capital, labor and overall TFP on three levels of national overall, different regions and ownership systems; 2) Rising real estate prices could obviously cause misallocation of resources and reduce the growth rate of TFP in manufacturing; 3) If the misallocation of resources were eliminated, the TFP would receive a highly increase of 20%-30%. The degree of influence of the virtual economy on the real economy is exactly what China and the countries with related problems need to study in depth. This study will make up the gaps in this research.

Researches about factor market distortions on the impacting factors of international technology spillover

Abstract: In this paper, we selected 1999-2015 Provincial Panel Data in China statistical yearbook. The effects of factor market distortions on international technology spillovers are discussed. In the factor market distorted elements of the market to promote the rapid growth of the economy in the short term, it may inhibit the international technology spillover effect, but the move is beneficial to realize the sustainability of high quality economic growth. The results showed that the technology spillover effects of the import trade, FDI and patent applications presented different feature in different stages. The article from the perspective of the development of technology breakthrough summarizes factors price distortions on the international technology spillover mechanism and study with the policy changes, elements of the market to improve dynamic changes, the factor price distortion effect of international technology spillovers stage effect.

The Heckscher—Ohlin—Samuelson Trade Theory and the Cambridge Capital Controversies: On the Validity of Factor Price Equalisation Theorem

Abstract: This paper examines the validity of the factor price equalisation theorem (FPET) in relation to capital theory. First, it presents a survey of the literature on Heckscher—Ohlin—Samuelson (HOS) models that treat capital as a primary factor, beginning with Samuelson (1953). In addition, by consulting the Cambridge capital controversies, this paper observes that the validity of the FPET relies crucially on this setting. It does no longer hold whenever capital is assumed to be a bundle of reproducible commodities. This paper also refers to the recent literature on the dynamic HOS trade theory and argues that such studies ignore the difficulties posed by the capital controversies. It thereby concludes that the FPET holds even when capital is modelled as a reproducible factor. In conclusion, the paper suggests the necessity of reconstructing basic theories of international trade without relying on the FPET.

Inflow of Educational Capital, Intermediation and Informal Sector

Abstract: Informal sector comprising of unrecorded, unregistered activities in developing economies of the world is a common feature at present scenario. Existence of such sectors in an economy clearly reflects the weakness of government to provide employment opportunities for all. Such informal activities are again facilitated through the extortionists who are bribed by the informal producers. Under such an economic structure the paper investigates into the effect of inflow of educational capital on endogenously determined factor prices and output of formal and informal sectors of an economy.Though there is no change in the factor earnings, an inflow of educational capital gives a boost to the output of skilled sector irrespective of any factor intensity assumption. Output of formal sector also expands depending on the factor intensity assumption but quite interestingly no change is seen in the output of informal sector. Inflow of educational capital leads to dampening of intermediation activities in an economy which is a positive result and this can help the policy makers to choose the right path of development.