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Factor price
About: Factor price is a research topic. Over the lifetime, 2764 publications have been published within this topic receiving 86176 citations.
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TL;DR: In this article, the theoretical and empirical properties of a model of aggregate supply behavior that was introduced in the 1970s but has received inadequate attention are investigated; the model postulates that price changes occur so as to gradually eliminate discrepancies between actual and market clearing values and to reflect expected changes in market-clearing values.
Abstract: This paper investigates the theoretical and empirical properties of a model of aggregate supply behavior that was introduced in the 1970s but has received inadequate attention. The model postulates that price changes occur so as to gradually eliminate discrepancies between actual and market-clearing values and to reflect expected changes in market-clearing values. Its implications are more 'classical' than most alternative formulations that reflect gradual price adjustment. Empirical results, which utilize a proxy for market-clearing output that is a function of fixed capital and the real price of oil, are moderately encouraging but not entirely supportive.
36 citations
Posted Content•
TL;DR: In this paper, the authors developed and estimated a model of a company's energy price exposure and presented evidence showing that increases in a company’s environmental sustainability lowers its energy prices.
Abstract: Energy security issues and climate change are two of the most pressing problems facing society and both of these problems are likely to increase energy price variability in the coming years. This paper develops and estimates a model of a company’s energy price exposure and presents evidence showing that increases in a company’s environmental sustainability lowers its energy price exposure. This result is robust across two different measures of energy prices. These results should be useful to companies seeking new ways of addressing energy price risk as well as governments concerned about the impact that energy price risk can have on economic growth and prosperity.
36 citations
TL;DR: In this article, a rational expectations supply response model incorporating price risk is developed, which is based on the second moment empirical example presented in this paper. But the model does not consider the variability of expected price.
Abstract: ducers is increased. Risk has long been recognized as potentially The purpose of this paper is to develop a important in determining agricultural supply. conceptual framework for incorporating a However, supply response models have either price risk variable into a rational expectations incorporated risk in an ad hoc manner or not model of supply response. The model is an at all. A rational expectations supply response improvement over previous rational expectamodel incorporating price risk is developed, tions models of supply response because it an estimation procedure suggested, and an does not disregard the second moment empirical example presented. (variance) of expected price. This approach represents a break with the Muthian reliance means for ignoring higher moments of the exTe role of risk iproduer deisionm- pectation (Sheffrin, pp. 10-11). Thus, the I he role of isk in producer decision mak- model allows the variability of an expectation ing has been recognized as a potentially to be reflected in supply response. When deciimportant determinant of production. Sandmo sion makers are risk adverse, this behavior has shown that competitive risk-averse firms will be evidenced by observed input allocaproduce a smaller output under price uncer- tions that are smaller than those implied by tainty than under the assumption of price cer- equating factor prices to marginal value prodtainty and that the higher the overall level of ucts. Additionally, by using a rational exrisk, ceteris paribus, the smaller the output. pectations framework, expectations are no Batra and Ullah have shown that an increase longer formed in an ad hoc manner as in in price risk leads to a decline in the firm's out- earlier risk models. The measure of price risk put in the case of decreasing absolute risk developed in the paper is based on the aversion. variability of the expectations error, and it is If producers are assumed rational and risk closer to the theoretical concept of price risk averse, they should consider not only ex- than measures used in previous studies. An pected output prices and yields when allocat- estimation procedure is illustrated with an ing resources, but also expected variability in empirical example based on sub-regional U.S. output prices and yields. The extent to which watermelon data. price and yield risks do in fact affect producer decisions is an empirical question. Given the
36 citations
TL;DR: In this article, the authors analyzed the case of the US antebellum transportation revolution between 1820 and 1860 and found that prices converged quite markedly across regions, but nominal wages converged very little.
Abstract: A widespread current policy concern is whether the international integration of product markets forces together wages across countries To help gain an insight into this issue, this paper analyses the case of the US antebellum transportation revolution Between 1820 and 1860 an extensive intranational network of canals and railroads emerged that dramatically reduced transportation costs within the country Motivated by the factor-price-convergence (FPC) theorem from Heckscher–Ohlin trade theory, this paper explores the impact of these cost reductions on regional product prices and wages The main empirical finding is that prices converged quite markedly across regions, but nominal wages converged very little The paper then discusses three possible explanations of no wage convergence
35 citations
TL;DR: In this paper, the authors show that consumers pay more when an amount model is used, while the seller has lower profits and different promotional strategies when a amount model was used, and consumer behavior is constrained by the amount model.
Abstract: Does it matter if managers use an absolute amount or the relativepercentage discount when determining the optimal price and promotionalstrategy for a good? Intuitively, one might expect that the results ofboth models (deal amount and deal percentage) would be identical. Thisresearch shows that the deal-percentage model dominates the deal-amountmodel on three dimensions: (1) consumers pay more when an amount modelis used, (2) the seller has lower profits and different promotionalstrategies when an amount model is used, and (3) consumer behavior isunrealistically constrained by the amount model. This research showsthat whenever the seller offers a promotion in the deal-amount model,the net price paid by the consumer (regular price minus the deal) isalways higher than the net price in the deal-discount model. Thisresult implies that the ultimate price and promotional strategy (suchas depth of promotion, timing of promotions, and so on) prescribed bythe models are different. Additionally, this research shows that whenconsumers respond similarly in the models, the seller's profits arehigher in the deal-percentage model. This finding is a direct result ofthe higher net price in the deal-amount model. Finally, contrary toempirical findings in the marketing literature, the deal-amount modelrequires consumers to respond more strongly to price changes than topromotions (that is, the promotional elasticity plus one must be lessthan the magnitude of the price elasticity) for the optimal price to bepositive. The deal-percentage model does not place similar restrictionson consumer behavior.
35 citations