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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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19 citations
TL;DR: In this article, the authors investigate price competition in a segmented market, where each segment contains one seller and one consumer, and consumers incur transportation costs when they buy from a seller located in another segment.
19 citations
TL;DR: In this article, the authors investigate optimal quality provision where quality is determined by congestion and find that an unregulated market leads to insufficient investment, and that price cap below the equilibrium price eliminates this inefficiency.
19 citations
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TL;DR: In this article, the role of institutions for labour market performance across European countries is investigated, and the authors suggest that higher flexibility and incentives of households to work appear to be appropriate strategies to improve the employment record.
Abstract: This paper investigates the role of institutions for labour market performance across European countries. As participation rates have been rather stable over the past, the unemployment problem is mainly caused by shortages in labour demand. Labour demand is expressed by its structural parameters, such as the elasticities of employment to output and factor prices. Institutional variables include employment protection legislation, the structure of wage bargaining, measures describing the tax and transfer system and active labour market policies. As cointegration between employment, output and factor prices is detected, labour demand equations are fitted in levels by efficient estimation techniques. To account for possible structural change, time varying parameter models and aysmmetries due to the business cycle situation are considered. Then, labour demand elasticities are explained by institutions using panel fixed effects regressions. The results suggest that higher flexibility and incentives of households to work appear to be appropriate strategies to improve the employment record. The employment response to economic conditions is stronger in a more deregulated environment, and the absorption of shocks can be relieved. However, the institutional database should be improved in order to arrive at more definite policy conclusions.
19 citations
Posted Content•
TL;DR: In this paper, the authors propose a new explanation for price rigidity, and show that if consumers form habits in individual goods, then firms face a time-inconsistency problem.
Abstract: We propose a new explanation for price rigidity. We show that if consumers form habits in individual goods, then firms face a time- inconsistency problem. The consumers’ habits imply that low prices in the future help attract customers in the present. Firms would therefore like to promise low prices in the future. But when the future arrives they have an incentive to exploit consumers’ habits and price gouge. In this model, unlike the standard no-habit model, nominal price rigidity is an equilibrium outcome. Equilibrium price rigidity can be sustained because rigid prices help firms overcome the time-inconsistency problem. If customers have incomplete information about firms’ desired prices, the optimal policy for the firm is to commit to a “price cap”. Our model therefore provides an explanation for the simultaneous existence of a rigid regular price and frequent sales, a pattern that is difficult to reconcile with existing menu cost models or price rigidity. Our model also explains survey evidence on firms’ fears of adverse customer reactions to price changes, the fact that firms make open commitments to customers not to change their prices, the tendency of price rigidity to increase with the frequency of repeat purchases and the tendency of prices to be more rigid to existing customers than new customers.
19 citations