Transaction fee economics in the Ethereum blockchain

We study the economic determinants of transaction fees in the Ethereum blockchain. We estimate an empirical model based on queueing theory and analyze the factors determining the “gas price” (transaction cost per unit of service, “gas”). Using block- and transaction-level data from the Ethereum blockchain, we show that changes in service demand significantly affect the gas price—when there is high block utilization, per-unit fees increase on average, with strong nonlinear effect above 90% utilization. The transaction type is another important factor—larger fraction of regular transactions (direct transfers between users) is associated with higher gas price.     

COLLUSION IN PROCUREMENT AUCTIONS: AN EXPERIMENTAL EXAMINATION

Experimental methods are used to examine the existence and detectability of collusion in environments that exhibit critical parallels to procurement auctions. We find that given the opportunity sellers often raise prices considerably. Moreover, noncollusive Nash equilibrium predictions are insufficient to dismiss "suspicious" behavior as innocuous: in an environment where identical prices are predicted in a noncollusive Nash equilibrium, common prices are observed only when sellers communicate. In a second environment designed to parallel construction procurement contracting, market rotations are observed both with and without collusion, but collusion can often be detected from the pattern of losing bids.     

COLLUSION FACILITATING AND COLLUSION BREAKING POWER OF SIMULTANEOUS ASCENDING AND DESCENDING PRICE AUCTIONS

This article demonstrates that a robust tacit collusion evolves quickly in a "collusion incubator" environment but is destroyed by the simultaneous descending price auction. Theories of collusion-producing behavior, along with the detail of the states on which strategies are conditioned, lead to a deeper understanding of how tacit collusion evolves and its necessary conditions. These theories explain how the descending price auction destroys the collusion. The experiments proceed by conducting simultaneous ascending price auctions in the collusion incubator. Then, once the tacit collusion developed, changing to the descending auction. The change moved prices from collusive levels to near-competitive levels. ( JEL C71, C92, D43, D44)     

ON INFLATION AND REAL PRICE VARIABILITY

This paper studies the consequences of costly price adjustments for the variability of real prices accompanying inflation. For constant-elasticity demand and cost of production it is shown that a higher demand, a lower cost of production, or a lower cost of price adjustment leads to less intertemporal variability of real prices. If the marginal cost of production does not increase "too" fast, then the average real price is less than the real price that would prevail in the absence of inflation; additionally, a higher demand, a lower cost of production, or a lower cost of price adjustment leads to a higher level of real prices.     

FINANCIAL INNOVATION, PRICE SMOOTHING, AND MONETARY POLICY

This paper examines an unregulated transaction services market that is subject to financial innovation in an economy that experiences aggregate supply and demand shocks. The availability of this unregulated market to transactors smooths the price response to these shocks. However, financial innovations act as money supply shocks that increase price disturbances. If there is persistence in the real aggregate supply shocks and in the rate of adoption of financial innovations, then the central bank can forecast some portion of the changes in transaction requirements that accompany these shocks and damp the residual variation in prices by accommodating these anticipated needs.     

THE EFFECT OF PROVIDER CONTROL OF BLUE SHIELD PLANS ON HEALTH CARE MARKETS

Blue Shield plans often are granted regulatory advantages by the states in which they operate. Run efficiently, such not-for-profit firms should use these lower costs to eliminate their less advantaged rivals, the commercial insurers. However, these higher-cost commercial providers have been able to offer insurance coverage at prices competitive with the Blues, as evidenced by the fact that Blue plans have, on average, less than 50 percent market share. Similar prices with lower overall costs implies that economic rents are being earned, rents which a not-for-profit firm cannot distribute to owners. In this paper we argue that when there are competing goals among the groups controlling the Blue Shield plans, the different possible "uses" of the regulatory advantage become endogenously determined, necessitating the use of simultaneous equation estimation. Testing this model we find the major effect of doctor-control of Blue Shield plans is to raise doctors' fees while lowering the amount of rents captured by both consumers and administrators.     

THE DEMAND for ILLICIT DRUGS

This paper estimates the effects of alcohol prices, marijuana decriminalization, cocaine prices, and heroin prices on the demand for these four substances. Both own price effects and cross price effects are estimated. The estimated price elasticities for alcohol, cocaine, and heroin are, respectively, –.30, –.28 and –.94. Marijuana decriminalization was found to increase the probability of marijuana participation by about 8%. The results for the cross price effects provide general evidence of complementarity. It is estimated that decriminalization of cocaine and heroin might lead to about 260,000 new regular cocaine users and about 47,000 new regular heroin users. ( JEL 110)     

A GUIDE TO THE PITFALLS OF IDENTIFYING PRICE DISCRIMINATION

This paper demonstrates that plausible cost-based explanations exist for what are commonly perceived to be cases of price discrimination. We explain such commonly discussed problems as the price spreads of retail gasoline products, the "high" price of dinners at restaurants, the "high" price of popcorn at movie theaters, and the fact that airline ticket prices vary with how long the ticket is purchased before the flight's departure. Our explanations benefit from not relying on consumer ignorance or implicit collusion among numerous sellers.     

AN EXPERIMENT ON INNOVATION AND COLLUSION

This paper examines the relationship between product innovation and the success of price collusion using novel laboratory experiments. Average market prices in low innovation (LO) experiments are significantly higher than those in high innovation, but otherwise identical experiments. This price difference is attributed to LO experimental subjects' greater common market experience. The data illustrate how collusion can be perceived as the “only way to make it” in LO markets where product innovation is not a viable strategy for increasing profits. They suggest that product homogeneity can be a proximate cause, and product innovation an ultimate cause, of collusion. (JEL L41, L10, C92)     

ADVANCE PRODUCTION,INVENTORIES, AND MARKET POWER: AN EXPERIMENTAL INVESTIGATION

We report an experiment that assesses the effects of alterations in production conditions and product durability on market power in Bertrand‐Edgeworth duopolies. Static equilibrium analysis predicts that advance (rather than “to demand”) production raises prices, but does not affect profits. The further addition of a simple inventory option causes prices to fall and seller earnings to increase. Contrary to these predictions, we observe similar prices in baseline and advance production treatments, but lower profits given advance production. An inventory option reduces both prices and earnings. Results are driven by the treatments' effects on sellers' capacities to tacitly collude. (JEL C9, D4, L4)     

INFORMATION SHARING AND TACIT COLLUSION IN LABORATORY DUOPOLY MARKETS

This paper reports 45 laboratory duopoly markets that examine the importance of information sharing in facilitating tacit collusion under conditions of demand uncertainty. Sellers in these repeated laboratory markets generally shared information when possible to reduce their demand uncertainty, which led to output reductions in some demand states. Risk aversion is a likely explanation for this sharing, but some sellers also appeared to employ a strategy of information concealment to punish non-colluding rivals. Nevertheless, output choices were similar in control treatments that forced sellers to share or conceal information, so the information sharing itself did not substantially increase tacit collusion. ( JEL C92, D80, L13)     

Physician Market Power—Evidence From the Allocation of Malpractice Premiums

Based on evidence from variations in malpractice premiums, physicians have local market power, at least in some dimensions. It is observed that higher-cost physicians pass on a significant portion of idiosyncratic costs to patients as higher prices. I test two hypothesized sources of this market power: barriers to entry from specialization and relatively inelastic firm-level demand for certain services. Examining the relationship of physician-specific malpractice premiums to fees, I find no observable difference in the ability of surgeons and nonsurgeons to pass on these costs; however, both types of physicians pass them on more to surgical than to nonsurgical patients.     

ISLANDS, INDEXATION AND MONETARY POLICY

This paper develops a synthesized macroeconomic model that incorporates the local-global informational asymmetries of an "islands" economy into a setting characterized by endogenous wage indexation. In such an economy, agents are unable both to filter out the separate influences of demand and supply shocks on observed output prices and to distinguish between the separate price effects of local and aggregate disturbances, so that optimal wage indexation depends upon both the variances of supply and demand disturbances and the information-conditioned forecasts of agents. As a result, optimal monetary policy generally depends upon the variances of local and aggregate supply and demand.     

DISEQUILIBRIUM EXCHANGE IN BARTER AND MONETARY ECONOMIES

This article compares the relative performances of barter and monetary arrangements at fixed disequilibrium prices. The decentralized functioning of the two systems is described, and their "fix-price" equilibria compared. It is shown that, while the fix-price equilibria will be more difficult to obtain in the barter economy, they are more efficient than in the monetary economy where disequilibrium "effective demand failures" appear.     

Complementarity and substitutability in family members' time allocated to household production activities

This study reviews the concepts of complementarity and substitutability and the theoretical representations of these concepts used in demand analysis. It highlights difficulties encountered in empirical estimation of these relationships in the absence of adequate price data. A procedure for investigating these relationships in demand analysis under the assumption of constant relative prices is proposed. A model is formulated to test these relationships in family members' time allocated to household production activities. The data used in this analysis were collected in the Interstate Regional Research Project (NE-113), U.S.D.A. A simultaneous regression procedure is used. Results indicate that time of homemakers and their spouses are weakly complementary in several household maintenance activities, unpaid work, eating, shopping, recreation, organizational participation, physical and non-physical care of family members, and physical care of self. Homemaker's time in food preparation and spouse's time in physical care of self are found to be weakly substitutable. Relationships of substitutability are identified for each family member individually in his/her own discretionary activities. Discussion centers on implications of the model assumptions and use of residual analysis in applications other than demand analysis.Rosemary Key is an Assistant Professor, Department of Consumer Economics & Housing, 103 Martha Van Rensselaer Hall, Cornell University, Ithaca, NY 14853. In addition to time management, her research interests include the psychological foundations of managerial activity, and how time use impacts consumer behavior. She received her Ph.D. from The Ohio State University.     

INFLATION AND ASYMMETRIC OUTPUT ADJUSTMENTS BY FIRMS

Using ordered probit analyses of a unique micro data set, we find evidence of output asymmetry that is systematically related to inflation and to price asymmetry. As predicted by theory, firms are more likely at higher rates of inflation to raise prices in response to positive cost and demand shocks and less likely to lower prices in response to negative cost and demand shocks. The expected effects of higher inflation on output asymmetry, however, come primarily from cost and demand increases and to a lesser (and statistically insignificant) extent from cost and demand decreases. (JEL E3, D4)     

RETAIL REDLINING: ARE GASOLINE PRICES HIGHER IN POOR AND MINORITY NEIGHBORHOODS?

This study uses new data on retail gasoline prices in three cities to provide evidence on the relationship between neighborhood characteristics and consumer prices. We find that prices do not vary greatly with neighborhood racial composition, but that prices are higher in poor neighborhoods. For a 10% point increase in poor families relative to middle‐upper income families, retail gasoline prices increase by an average of 0.70%. Two‐thirds of this differential is explained by cost, competition, and demand characteristics of poor neighborhoods. The remaining differential likely reflects price discrimination in response to lower competition and/or more inelastic demand in poor neighborhoods. (JEL D43, J15, L71)     

EMISSION TAXES,CLEAN TECHNOLOGY COOPERATION,AND PRODUCT MARKET COLLUSION: EXPERIMENTAL EVIDENCE

We use a laboratory experiment to study the link between cooperative research and development (R&D) in clean technology and collusion in a downstream product market in the presence of a time‐consistent emissions tax. Such a tax creates additional interconnections between firms, in addition to the standard technological spillovers. Our results show a strong link between R&D cooperation and market collusion under symmetric R&D spillovers in a duopoly, but when the spillovers are asymmetric, R&D cooperation does not necessarily result in collusion. With symmetric spillovers, the link between R&D cooperation and collusion remains strong even in three‐ and four‐firm industries. (JEL C90, L5, O30, Q55)     

Coal demand,market forces,and U.S. coal mine closures

Economic transitions have the potential to displace workers and cause social unrest. Coal mine closures and the resulting employment losses in rural areas have become salient issues. Using data on coal mine and power plant operation, we model closure as a function of expected profits, which allows us to compare the effects on mine closure of specific demand and supply shocks to expected mine profits. Increasing costs of production have had a large impact on closures, but lower natural gas prices and lower electricity demand have played more recently important roles.     

TACIT COLLUSION IN AUCTIONS AND CONDITIONS FOR ITS FACILITATION AND PREVENTION: EQUILIBRIUM SELECTION IN LABORATORY EXPERIMENTAL MARKETS

The paper studies bidder behavior in simultaneous, continuous, ascending price auctions. We design and implement a "collusion incubator" environment based on a type of public, symmetrically "folded" and "item-aligned" preferences. Tacit collusion develops quickly and reliably within the environment. Once tacit collusion developed, it proved remarkably robust to institutional changes that weakened it as an equilibrium of a game-theoretic model. The only successful remedy was a non-public change in the preference of participants that destroyed the symmetrically, "folded" and "item aligned" patterns of preferences, creating head-to-head competition between two agents reminiscent of the concept of a "maverick." ( JEL L50, L94, D43)