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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 paper, a model of price transmission where both oligopoly and oligopsony power co-exist and where industry technology is assumed to be characterised by variable input proportions is presented.
Abstract: Several studies in the literature have argued that price transmission in vertically-related markets is imperfect, i.e. that farm input price changes are not fully passed-through to the final product price. Market power, notably oligopoly, is presumed to be the principal source of imperfect price transmission. To date, the impact of oligopsony (buyer) power on the degree of price transmission has not been evaluated using a formal theoretical model. Moreover, neither has the combination of oligopoly and oligopsony despite the fact that its influence has been formally acknowledged in both the UK and some European food markets. This paper makes a contribution to the literature by developing a model of price transmission where both oligopoly and oligopsony power co-exist and where industry technology is assumed to be characterised by variable input proportions. It shows that taking the degree of price transmission in a perfectly competitive market as a benchmark, oligopoly and oligopsony power do not necessarily lead to imperfect price transmission, although they can. Indeed, they may counteract each other's impact on the degree of price transmission. The key to these outcomes is to be found in the functional forms for retail demand and farm supply.
90 citations
TL;DR: In this paper, the authors developed a search theoretic model which is consistent with empirical evidence that prices are sticky with respect to cost changes and showed that prices respond more rapidly to cost increases than to cost decreases.
90 citations
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TL;DR: In this paper, the authors analyzed the pricing behavior of Luxembourg firms based on survey evidence and found that a majority of firms use price review rules that include elements of state dependency, and that adjustment speed is faster when cost goes up and demand goes down than in the opposite cases.
Abstract: This paper analyses the pricing behaviour of Luxembourg firms based on survey evidence. Luxembourg firms typically have low market share, many competitors and longstanding customer relationships. Price discrimination is frequently applied. A majority of firms use price review rules that include elements of state dependency. The median firm reviews and changes prices twice a year. The results suggest an almost equal share of firms applying forward-looking, backward-looking and rules of thumb behaviour. The adjustment speed is faster when cost goes up and demand goes down than in the opposite cases. The most relevant theories explaining price rigidity are implicit contracts, cost-based pricing and explicit contracts. Increases in labour and other costs are the most important factors leading to price increases; for price reductions it is price reductions by competitors followed by declining labour costs.
89 citations
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TL;DR: In this article, the authors present new evidence on the formation of producer prices based on a onetime survey that was conducted on a sample of 1200 German firms in manufacturing in June 2004.
Abstract: This paper presents new evidence on the formation of producer prices based on a onetime survey that was conducted on a sample of 1200 German firms in manufacturing in June 2004. Most of the firms have price-setting power and apply mark-up pricing. Indexation is negligible. Fixed nominal contracts are the most important reason for postponing a price adjustment. The second most likely reason is coordination failure, which causes more upward than downward stickiness. For every second firm both reasons are important. Firms can be assigned to four different groups according to an increasing complexity of reasons of price stickiness.
88 citations
TL;DR: Dupor and Loyo as discussed by the authors show that by carefully tailoring policies in an independent fashion, governments can eliminate price and exchange rate indeterminacy, and they also show that their policies can be tailored in a way that they never set policy to yield an intertemporal government budget surplus.
88 citations