Asking Price and Price Discounts: The Strategy of Selling an Asset Under Price Uncertainty

We consider fixed and asking price strategies in the context of selling an asset with Bernoullian updating of the seller’s subjective probability of sale at a given price. The determination of optimal fixed, asking and endogenous reservation prices is discussed under risk-neutrality and expected utility maximisation. With risk-neutrality, the optimal asking price exceeds the optimal fixed price when the expected gain is a strictly concave function. The seller’s choice between the fixed and the asking price strategies depends on several factors: the expected cost of haggling, price competition and the seller’s attitude towards risk.     

Willingness-to-pay and willingness-to-accept for risky and ambiguous lotteries

Former studies have shown that people tend to give buying prices that are lower than selling prices. In our study, we investigate if this willingness-to-accept and willingness-to-pay disparity is affected by ambiguity. Using a Becker, DeGroot, and Marschak procedure, we elicit buying, selling, short-selling, and short-buying prices. The results indicate that subjects clearly distinguish between risky and ambiguous lotteries and the different ways in which lotteries are framed. However, the average WTA/WTP ratios are remarkably close for all lotteries considered, as well as for negative and positive framing.     

唐代物价制定及其作用

在唐代,市估不但对官方行为具有强制性作用,是官方买卖、收付折算、平赃定罪、控制物价必须依据的价格标准;对一般民间(私人)交易也有着不同程度的约束(指导、调节)作用,且在有人请求、发生争执、立券公证等情况下也不排除依市估而定。笔者以为对唐代国家的物价管理政策及“官市依估,私但两和”的交易原则,不宜做绝对性理解。     

On a lottery pricing anomaly: Time tells the tale

This article identifies a lottery pricing anomaly, which I call the “r=x anomaly,” that is present in past pricing experiments—namely, a tendency for subjects to announce that their minimum selling price for some binary lottery is the greater of the two lottery prizes. The study shows that the anomaly is inconsistent with two theoretical explanations for another well-known pricing anomaly (preference reversal) and experimentally replicates these inconsistencies. The new experiment also measures the time subjects spend making their pricing decisions. These decision-time measurements suggest that ther=x anomaly may be a decision-cost effect.     

Experimental markets for insurance

This article extends the large amount of research on double-oral auction markets to hazards that produce only losses. We report results from a series of experiments in which subjects endowed with low-probability losses can pay a premium for insurance protection. Insurers specify the price at which they are willing to assume the risk of a loss. Insurance prices approach expected value for a large range of probabilities and loss amounts. Subjects seem to realize losses are statistically independent. Prices are not affected by ambiguity about the probability of loss.     

A model of price and quantity adjustments in primary commodity markets

This paper presents a dynamic, simultaneous model of price and quantity adjustments in world primary commodity markets. The model is formulated in a disequilibrium framework, emphasizing particularly the role of price adjustment. In addition to the price equation, commodity consumption and production equations are also specified. The empirical analysis of the model is carried out with the annual data of six primary commodities: coffee, cocoa, rubber, copper, tin, and sugar. This includes the estimation of price, consumption, production equations, the simulation tests of complete structural models for these six commodities, and the derivation of dynamic responses (measured by elasticities) of commodity prices to changes in world income, world inflation, and commodity outputs. Dynamic simulations strongly confirm the commonly observed self-generating and recurring boom-and-bust cycles of primary commodity prices. This finding lends credibility to the models constructed.     

Efficiency of spatial price discovery for U.S. rice under different farm policies and economic conditions

Changes in the discovery of U.S. spatial milled rice prices due to the shift from stable economic conditions and government policy of supply control in the 1960s to the more variable economic conditions and market-oriented rice farm policy of the 1970s are investigated. Efficiency of the markets was evaluated in terms of the magnitude and speed of price adjustments over three different time periods. The efficiency of the price discovery process is of concern to policymakers because firms must receive price signals quickly and accurately in order to use their resources optimally.     

Price Versus Quantity: Market-Clearing Mechanisms When Consumers are Uncertain about Quality

High-quality producers in a market where quality varies can reap superior profits by charging higher prices, selling greater quantities, or both. Empirical analyses of the mutual fund and automobile industries show that high-quality producers sell more units than their low-quality competitors, but at no higher price (or retail markup) per unit. Our theoretical models find that if qualities are known by consumers and production costs are constant, then having a higher quality secures the producer both higher price and higher quantity. The market may clear in a different fashion if there is "quality uncertainty"; that is, if some consumers can discern quality but others cannot. Then, high- and low-quality producers may end up setting a common price, which allows the high-quality producer to sell substantially more. In this context, quality begets quantity.     

A possibilistic hierarchical model for behaviour under uncertainty

Hierarchical models are commonly used for modelling uncertainty. They arise whenever there is a `correct' or `ideal' uncertainty model but the modeller is uncertain about what it is. Hierarchical models which involve probability distributions are widely used in Bayesian inference. Alternative models which involve possibility distributions have been proposed by several authors, but these models do not have a clear operational meaning. This paper describes a new hierarchical model which is mathematically equivalent to some of the earlier, possibilistic models and also has a simple behavioural interpretation, in terms of betting rates concerning whether or not a decision maker will agree to buy or sell a risky investment for a specified price. We give a representation theorem which shows that any consistent model of this kind can be interpreted as a model for uncertainty about the behaviour of a Bayesian decision maker. We describe how the model can be used to generate buying and selling prices and to make decisions.     

Inflation,oil prices and exchange rates. The Euro’s dampening effect

This paper aims to analyse the relationship between the euro/dollar exchange rate and oil prices and examine what effect this relationship had on the transmission of oil price fluctuations to headline inflation in the euro area since the currency’s creation. We estimate an augmented Phillips curve including changes in oil price, through which we study the role of the exchange rate in oil price pass-through by using different specifications. The main findings reveal a positive relationship between the euro/dollar exchange rate and oil prices, such that an increase in the price of oil is followed by an appreciation in the euro. We also find that the transmission of oil price fluctuations to headline inflation in the euro area has been partially dampened by this appreciation in the euro/dollar exchange rate. These results do not hold for other economies with internationally relevant currencies, such as Japan and the United Kingdom. These findings have important implications for the implementation of monetary policy in the euro area in the face of oil price shocks.     

Are Preference Reversals Errors? An Experimental Investigation

This paper investigates whether some part of the preference reversal phenomenon can be attributed to errors in the responses of subjects in experiments. Such errors have been well documented in other investigations of behaviour in risky decision problems, but their relevance to the preference reversal phenomenon has not been explored. Building on earlier work, we develop an extended error model and apply it to the results of an experiment in which subjects tackle risky choice problems on five separate occasions. In this experiment subjects had to answer choice questions in three occasions and to state selling and buying prices in the remaining two occasions. Our results indicate that scale compatibility can be ruled out as a significant sole explanation of the preference reversal phenomenon. Moreover, we can show that a considerable fraction of observed preference reversals can be classified as pricing errors, whereas choice errors turn out to play a minor role.     

A small open economy model applied to an evaluation of Canadian energy policies using 1980 data

This paper describes an applied general equilibrium model for policy evaluation in the small open price-taking economy case. We use the approach to analyze the effects of Canadian energy price policies. The net outcome in terms of national welfare depends on two separate effects. Consumer and producer prices set below world prices result in over-consumption and under-production of energy, and welfare loss. Producer prices of energy set below world prices reduce the factor returns accruing to owners of resources in Canada, many of whom are foreigners. Our results portray the rent transfer effect against foreigners as the dominant effect of these policies. Removing price controls is a nationally welfare worsening change, since the increased rents transferred to foreigners more than outweigh the welfare gain.     

Energy supply shocks: Macroeconomic consequences for Ukraine

In exploring the short-term macroeconomic effects of energy supply shocks in Ukraine, this paper relies on the simplifying assumption that enterprises face economic regulation but not ownership uncertainty or a soft budget constraint that would adversely affect their behavior. In a sense, it assumes that Ukraine's economy is already at the second stage of reform, when ownership, contract-enforcement, and hard budget constraint questions are less of an issue. Under these assumptions and if real wages are protected, the analysis yields clear messages. Protecting the domestic economy by not passing through external price increases may cushion the decline in production and social welfare, but at a heavy cost to savings and investment; not only does it postpone adjustment and the emergence of a competitive economy, but it also deprives the economy of investible resources. Passing through external price increases while maintaining a fixed-price regime may improve the mobilization of resources but at a heavy cost to output and welfare, because it induces a heavy contraction in activity. Liberalizing prices in the nonenergy sectors in conjunction with passing through external price increases allows these sectors to generate the larger resource transfers required by a deteriorating terms of trade, in turn pulling up output; the economy can settle at a higher level of activity and welfare than in the presence of fixed prices. The conclusion is that Ukraine must clarify ownership and contract-enforcement issues as well as harden the budget constraints of enterprises as rapidly as possible, liberalize nonenergy prices at a minimum, and begin adjusting domestic energy prices to reflect the opportunity cost of these resources. Since the fall of 1994, Ukraine has proceeded to liberalize its price and trade regime, which should bring the economy a long way to recovery as outlined in this paper.     

The relationship between conflict events and commodity prices in Sudan

Though recent literature uncovers linkages between commodity prices and conflict, the causal direction of the relationship remains ambiguous. We attempt to contribute to this strand of research by studying the dynamic relationship of commodity prices and the onsets of conflict events in Sudan. Using monthly data ranging from January 2001 through December 2012, we identify a structural breakpoint in the multivariate time series model of prices of the three staple foods (sorghum, millet, and wheat) and conflict measure (number of conflict events) in September of 2011. Applying structural vector autoregression (SVAR) and linear non-Gaussian acyclic model (LiNGAM), we find that wheat price fluctuation is a root cause of conflict events in Sudan. We recommend several policy and programmatic suggestions structured toward production, subsidy, price regulation and support for rural farmers and consumers to stabilize commodity prices.     

On welfare effects of increasing retirement age

We develop an OLG model with realistic assumptions about longevity to analyze the welfare effects of raising the retirement age. We look at a scenario where an economy has a pay-as-you-go defined benefit scheme and compare it to a scenario with defined contribution schemes (funded or notional). We show that, initially, in both types of pension system schemes the majority of welfare effects comes from adjustments in taxes and/or prices. After the transition period, welfare effects are predominantly generated by the preference for smoothing inherent in many widely used models. We also show that although incentives differ between defined benefit and defined contribution systems, the welfare effects are of comparable magnitude under both schemes. We provide an explanation for this counter-intuitive result.     

What Price Nondisclosure? The Effects of Nondisclosure of Real Estate Sales Prices*

Objective. Only a select set of states still do not require mandatory public disclosure of real estate sales prices. In this article we examine the possible public‐sector consequences of failing to make real estate sales prices publicly accessible. Methods. We propose a set of possible public‐sector consequences of sales price nondisclosure (property tax assessment inequities, tax revenue leakages, administrative inefficiencies, and related ancillary effects). We identify examples, provide limited empirical evidence (simple regressions and distributional analyses) on the restricted data available, and discuss the relevant legal considerations at a variety of administrative and geographic scales. Results. The limited statistical results and examples provide evidence of possible inequities in effective tax rates and tax revenue leakages that may be connected to sale price nondisclosure. Conclusions. We argue that there is a strong prima facie case for legitimate public concerns attached to real estate sales price nondisclosure.     

Automobile prices and protection: The U.S.-Japan trade restraint

We examine the effects of the U.S.-Japan trade restraint on automobile prices and quality upgrading, for both Japanese imports and American small cars. From April 1981 to April 1984 the suggested retail price of all Japanese models increased by 15.8 percent, or 5.3 percent per year. We find that nearly the entire amount of this rise can be explained by the upgrading of individual models. This upgrading may benefit consumers who would purchase a luxury import in any case, but harms those who desire the basic imports. In addition to upgrading, we conclude that a second cost of the trade restraint has been to prevent the yen depreciation from being passed onto American consumers, in terms of lower imported auto prices. For U.S. small cars we find a 9.1 percent rise in the suggested retail price, or 3 percent per year, with a fraction of this amount due to model upgrading. If the yen depreciation had led to lower import prices without the trade restraint, then we expect that U.S. auto prices would have been lower, too.     

Modeling manufactured imports: Methodological issues with evidence from Australia

This paper investigates the relationship between manufactured import flow to Australia, and relative prices and domestic economic activity net of cyclical demand effects over the period 1981Q3 to 1991Q2. This is done through the estimation of import demand functions for total manufactured imports and nine major import categories using the general-to-specific modeling approach. We find that the homotheticity assumption on activity elasticity is met in most cases. The price elasticity estimates for individual categories range from 0.32 to 2.1, with a weighted average of 0.52. We also find some evidence of upward bias in price elasticity estimates when an aggregate import function is employed in a context where a significant portion of imports are subject to quantitative restrictions (QRs).     

股票市场非流通股全流通价格的选择与比较

中国股票市场流通制度的缺陷是市场系统性风险的根源所在 ,出路在于股票市场非流通股的全流通。全流通成功的关键在于合理确定全流通的股票价格。以预期每股收益为基础的全流通价格理论依据在于公司的资产价值而不是企业价值 ,企业价值不在于资产值多少钱 ,而在于这些资产每年能创造出多少利润。以数据的形式 ,从投资的公平与效率的角度 ,对非流通股全流通价格选择的净资产定价和每股收益定价进行了分析与比较。提出应以净资产值作为非流通股全流通的定价基础 ,以净资产配售方式逐步解决非流通股全流通问题。     

Measuring the economic impacts of recent oil price shocks on oil-dependent economy: evidence from Malaysia

This paper examines the economy-wide impacts of recent oil price shocks on the Malaysian economy. To achieve this objective, an integrated methodological framework that combines econometric and input–output models is utilized to assess the impacts of an oil price shock on tax revenues, employment, labor income and gross domestic product (GDP). Our results reveal that the recent oil price shocks significantly affects these macroeconomic variables. The decline in oil prices from 2015 to 2016 reduces tax revenues by 10.5%, lower GDP by 1.9% and increases the unemployment rate by 0.3%. As such, the sharp crunch in oil prices serves as a reminder to policymakers on the vulnerability inherent in overreliance on oil exports and the urgent need to diversify the economy.