30 research outputs found

    The Endogenous Market Structures Approach. A Technical Survey with Applications to the Theory of Business Cycles, Trade and Growth

    Get PDF
    The EMSs approach to macroeconomics introduces strategic interactions and en- dogenous entry decisions in the analysis of aggregate phenomena. This approach departs from the perfectly competitive environment, in the sense that rms do not take prices as given, but they do choose their entry and production strategies and they interact strategically. In general equilibrium, this leads to novel implications for the mechanism of propagation of aggregate shocks, for the theory of the gains from trade and for the sources of the growth process. We introduce this emerging literature and discuss some of its implications.

    Incomplete cost pass-through under deep habits

    Get PDF
    A number of empirical studies document that marginal cost shocks are not fully passed through to prices at the firm level and that prices are substantially less volatile than costs. We show that in the relative-deep-habits model of Ravn, Schmitt-Grohe, and Uribe (2006), firm-specific marginal cost shocks are not fully passed through to product prices. That is, in response to a firm-specific increase in marginal costs, prices rise, but by less than marginal costs leading to a decline in the firm-specific markup of prices over marginal costs. Pass-through is predicted to be even lower when shocks to marginal costs are anticipated by firms. In our model, unanticipated firm-specific cost shocks lead to incomplete pass-through (or a decline in markups) of about 20 percent and anticipated cost shocks are associated with incomplete pass-through of about 50 percent. The model predicts that cost pass-through is increasing in the persistence of marginal cost shocks and U-shaped in the strength of habits. The relative-deep-habits model implies that conditional on marginal cost disturbances, prices are less volatile than marginal costs

    Incomplete Cost Pass-Through Under Deep Habits

    Get PDF
    A number of empirical studies document that marginal cost shocks are not fully passed through to prices at the firm level and that prices are substantially less volatile than costs. We show that in the relative-deep-habits model of Ravn, Schmitt-Grohe, and Uribe (2006), firm-specific marginal cost shocks are not fully passed through to product prices. That is, in response to a firm-specific increase in marginal costs, prices rise, but by less than marginal costs leading to a decline in the firm-specific markup of prices over marginal costs. Pass-through is predicted to be even lower when shocks to marginal costs are anticipated by firms. In our model, unanticipated firm-specific cost shocks lead to incomplete pass-through (or a decline in markups) of about 20 percent and anticipated cost shocks are associated with incomplete pass-through of about 50 percent. The model predicts that cost pass-through is increasing in the persistence of marginal cost shocks and U-shaped in the strength of habits. The relative-deep-habits model implies that conditional on marginal cost disturbances, prices are less volatile than marginal costs.

    Incomplete Cost Pass-Through Under Deep Habits

    Get PDF
    A number of empirical studies document that marginal cost shocks are not fully passed through to prices at the firm level and that prices are substantially less volatile than costs. We show that in the relative-deep-habits model of Ravn, Schmitt-Grohe, and Uribe (2006), firm-specific marginal cost shocks are not fully passed through to product prices. That is, in response to a firm-specific increase in marginal costs, prices rise, but by less than marginal costs leading to a decline in the firm-specific markup of prices over marginal costs. Pass-through is predicted to be even lower when shocks to marginal costs are anticipated by firms. In our model unanticipated firm-specific cost shocks lead to incomplete pass-through (or a decline in markups) of about 20 percent and anticipated cost shocks are associated with incomplete pass-through of about 50 percent. The model predicts that cost pass-through is increasing in the persistence of marginal cost shocks and U-shaped in the strength of habits. The relative-deep-habits model implies that conditional on marginal cost disturbances, prices are less volatile than marginal costs.Deep Habit formation, Markups, Cost Pass-Through

    Exchange Rate Uncertainty and Labour Market Adjustment under Fixed and Flexible Exchange Rates

    Get PDF
    The standard literature on working time has modelled the decisions of firms in a deterministic framework in which firms can choose between employment and overtime (given mandated standard hours). Contrary to this approach, we follow the real options approach, which allows us to investigate the value to a firm of waiting to adjust labour when the firm‘s revenues in domestic currency are stochastic and adjustment costs are sunk. The simulations reject the null hypothesis that all exchange rate regimes obey common employment adjustment thresholds.real option theory, uncertainty, working time, employment, labour demand, exchange rates.

    A Supply Chain Equilibrium Model with General Price-Dependent Demand

    Get PDF
    The concept of supply chain equilibrium has been widely employed to solve real-life cases. Under this concept, decisions makers move simultaneously and compete in a noncooperative manner to achieve a supply chain network equilibrium. This paper proposes a supply chain network equilibrium model consisting of multiple raw material suppliers, manufacturers and retailers. Unlike previous studies, we assume that the demand for the product at each retail outlet is modeled as general stochastic functions of price that encompass additive-multiplicative demand models used in previous studies. Under general price-dependent demand functions, we derive the optimality conditions of suppliers, manufacturers and retailers, and establish that the governing equilibrium conditions can be formulated as a finite-dimensional variational inequality problem. The existence and uniqueness of the solution to the variational inequality are examined. A sensitivity analysis and a series of numerical tests are conducted to illustrate the analytical effects of demand distribution, model parameters, demand level and variability on quantity shipments, prices, and expected profits. Managerial insights are reported to show the impact of different types of demand functions and model parameters on the equilibrium solutions

    The impact of a store brand introduction in a supply chain with competing manufacturers: The strategic role of pricing and advertising decision timing

    Get PDF
    This research studies the impact of a store brand’s introduction in a supply chain where a retailer offers the national brands of competing manufacturers. The focus in this paper is to study such impact given different manufacturers’ decision timing choices with regards to how they set pricing and advertising decisions. We develop a game-theoretic model that is based on consumer utility functions to represent competition between the national and store brands. We then solve six games to take into account different decision timing choices. In particular, we consider whether manufacturers decide of advertising before, after, or at the same time than pricing. Comparisons of equilibrium profits for each supply chain member before and after store brand entry under each decision timing scenario show that national brand manufacturers incur losses as a result of the retailer’s store brand when they keep their decision timing unchanged. Interestingly, however, the retailer may restrain from introducing the store brand especially if the national brand manufacturers set pricing decisions before advertising, as is the case with fixed pricing contracts, and if the level of competition between the national brands is sufficiently high. Further, manufacturers can strategically change their decision timing to either benefit from, prevent or restrict losses from the retailer’s store brand. These results provide new insights on how competitive interactions and contractual agreements in manufacturer-led supply chains can impact the success of store brands for retailers and mitigate or intensify their threat for national brands.Agencia Estatal de Investigación (AEI) - Junta de Castilla y León (projects ECO2017-82227-P, PID2020-112509GB-I00 and VA169P20
    corecore