Factor price

About: Factor price is a research topic. Over the lifetime, 2764 publications have been published within this topic receiving 86176 citations.

The Enforcement of Public Price Controls

Abstract: Price controls differ across industries systematically as predicted by the theory regulators maximize political support. This approach views the price controllers as choosing, subject to technology and budget constraints, the appropriate enforcement to balance the support from holding down prices against the opposition from dead-weight loss. Differences in enforcement depend on weights in the official price index, elasticities of supply and demand, and structural characteristics of industries. Data from the 1971-74 regime of price controls are used to test the theory. The empirical evidence clearly shows the predicted differences in price controls for a cross section of industries.

Price dispersion, price flexibility, and repeated purchasing

Abstract: This paper presents a search model in which consumers repeatedly purchase a commodity. The repetition of purchases leads to the formation of implicit contracts with sellers which generate a kink in the demand curve facing each seller. These kinks can generate equilibrium price dispersion under conditions where single-purchase search models predict no price dispersion. Despite the kinks, prices are at least partially flexible in that some, and possibly all, sellers change their prices in response to changes in production costs or demand. Dispersion de prix, flexibilite des prix et achats repetes. Ce memoire presente un modele de recherche dans lequel les consommateurs font des achats repete's d'un bien. La repetition de l'achat entraine la formation de contrats implicites avec les vendeurs. Ceci cree un pli dans la cedule de demande A laquelle chaque vendeur fait face. Ces plis peuvent engendrer une dispersion des prix d'equilibre alors que le meme modele ne predirait aucune dispersion de prix en l'absence d'achats repet's. Malgre les plis, les prix sont au moins partiellement flexibles puisque certains vendeurs, tous peut-&re, peuvent changer leurs prix en reponse A des changements dans les cofuts de production ou dans la demande.

The Structural Manifestation of the ‘Dutch Disease’; The Case of Oil Exporting Countries

Abstract: This study derives structural implications of the Dutch disease in oil-exporting countries due to permanent oil price shocks from a typical model. We then test these implications in manufacturing sector data across a wide group of countries including oil-exporters covering 1977 to 2004. The results on oil-exporting countries are four folds. First, we find that permanent increases in oil price negatively impact output in manufacturing as consistent with the Dutch disease. Second, Evidence in the data shows that oil windfall shocks have a stronger impact on manufacturing sectors in countries with more open capital markets to foreign investment. Third, we find that the relative factor price of labor to capital, and capital intensity in manufacturing sectors appreciate as windfall increases. Fourth, we find that manufacturing sectors with higher capital intensity are less affected by windfall shocks than their peers, possibly due to a larger share of the effect being absorbed by more laborintensive tradable sectors. An implication of the fourth result is that having diverse manufacturing sectors in capital intensity helps cushion the volatility of oil shocks.

Stochastic inflation and the optimal policy of price adjustment

Abstract: This paper analyzes the optimal policy of price adjustment for a monopolistic firm in the presence of stochastic inflation. It shows that an increase in the expected rate of inflation or in the cost of price adjustment leads to an increase in the initial real price and a decrease in the terminal real price in each period with a fixed nominal price. It also shows that the effects of increased riskiness of inflation are ambiguous.

Search Costs, Demand Structure and Long Tail in Electronic Markets: Theory and Evidence

Abstract: It is well known that the Internet has significantly reduced consumers’ search costs online. But relatively little is known about how search costs affect consumer demand structure in online markets. In this paper, we identify the impact of search costs on firm competition and market structure by exploring a unique theoretical insight that search costs create a kink in aggregate demand when firms change prices. The significance of the kink reflects the magnitude of online search costs and the kinked demand function provides information on how search costs affect competition in the online market. Using a dataset collected from Amazon and Barnes & Noble, we find that search costs vary significantly across online retailers. Consumers face low search costs for price information from Amazon.com. It leads to a higher price elasticity when the firm reduces prices than when it increases prices, increasing Amazon’s incentive to engage in price competition. On the other hand, consumers face relatively higher search costs for price information from Barnes & Noble. This leads to a lower price elasticity when Barnes & Noble reduces prices than when it increases prices, reducing Barnes & Noble’s incentive to engage in price competition. We also find that search costs decrease with the passage of time as the information about price changes dissipates among consumers, leading to increased price elasticity over time. Finally, we highlight that search costs are lower for popular books compared to rare and unpopular books. These findings have implications for the impact of the Internet on the Long Tail phenomenon.