Statement of the problem: In general resource (of which oil) abundance countries face some problems in their sustainable development. Crucial point for these countries is efficiently using of oil revenues in order to development non-oil sector of economy. In this regard first of all should be estimated impact of oil sector on whole economy as well as on its sectors. Azerbaijan as oil exporting country extracted more than 50 million ton, and exported about 43 million ton of it in 2009. The share of oil export in total export is about 95%. So, it is very important to investigate influence of oil sector (oil price or oil revenues) on non -oil sector in Azerbaijan Republic. This study may be realized by using different ways. But by analyzing interrelation between sectors we can reveal that how oil sector affects other sectors of economy. In this regard construction and assessment of “Input-output” model and it’s dual namely “Equilibrium prices” model –is very useful.
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Two branches of literature must be considered as background for this paper. On the one hand, since hardware and software are complement goods, we have to look at models of competition in complementary markets. Economides and Salop (1992) analyse competition when complement goods may be combined, deriving the equilibrium prices in the market. They also analyse hor- izontal and vertical integration and derive welfare properties. Similarly, Choi (2008) analyses the effects of mergers in markets with complements, when it is possible to sell bundles in the market. Welfare properties of mergers are not clear, they “could entail both pro-competitive and anti-competitive effects” (Choi 2008).
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This paper extends the growing literature of channel studies by analyzing pricing strategies for a three-level supply chain consisting of supplier, manufacturer and retailer. Three different channel structures are considered. They are the decentralized channel, the semi-integrated channel and the integrated channel. Two non-cooperative games are used to model different power structures for the first two channel structures, i.e., Stackelberg and Nash games. We also investigate the effects of power structures, channel structures and market parameters on the pricing decisions and profits for channel members. Our results show that when the manufacturer or the integrated members take the leadership of the supply chain for either decentralized or semi-integrated channel, the equilibrium prices are lower and profits are higher compared with the channel without such leadership. Our results also provide fresh new insights into vertical integration. In MR-integration channel, the integration of the manufacturer and the retailer cannot provide larger profits for them or the other channel member unless the price elastic b is no less than a certain level (3.5396). In general, the integration for the manufacturer and the retailer cannot always improve their profits in a monopoly when a multi-level channel is considered.
The current article also analyzes a duopoly with cross-market price constraints, but it introduces several important changes from previous models. It allows both firms to enter both markets, and entry to both markets is simultaneous, and is not subsidized by a regulatory agency. The article also analyzes the effects of product differentiation and entry costs on equilibrium entry and pricing. In addition, the article compares the equilibrium with and without price discrimination, and reaches the opposite conclusion to that of Armstrong and Vickers (1993): banning price discrimination in the model presented here actually tends to discourage entry and to increase equilibrium prices. The idea that price discrimination can intensify competition and lower prices in imperfect competition appeared also in Corts (1998). In Corts’ model, however, this is the result of asymmetries in the demand functions of the two consumer groups, while here this result comes from the effect that allowing price discrimination has on entry decisions (Corts does not consider entry).
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In this paper we seek for a game-theoretic foundation of the dominant-firm model of price leadership based on quantity-setting games; but in this case the term “price leadership” may not be appropriate since we use quantity as the strategic variable. Nevertheless, we will establish that if the large firm is the exogenously specified first mover, then the equilibrium prices and quantities of the appropriate sequence of quantity-setting games will converge to the same values determined by the dominant-firm model of price leadership (Proposition 1). 2
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First, I present a base case that shows the equilibrium sequence of expected slaughter lamb quantities and prices based on exogenous policy variables as they actually occurred. Secondly, I simulate prices and quantities that would have occurred if the Wool Act had been reauthorized in 1996 and remained in place through 2000. Next, I simulate the imposition of a tariff-rate quota on imports of lamb meat. The tariff-rate quota is imposed beginning in 1998 and ends in 2000, which is similar to three-year Escape Clause intervention that actually occurred. The model developed here includes joint outputs where policy variables, such as production subsidies and protection from imports, affect the equilibrium sequence of quantities and prices of the joint outputs. Imported lamb meat, which is modeled as a separate product, affects the demand for domestic lamb meat because imported lamb meat and domestic lamb meat are substitutes and indirectly affects the demand for slaughter lambs. In a manner similar to the decision making process of a flock owner, I simulate how prices and quantities respond to exogenous variables period by period incorporating new information as it becomes available. This analysis is similar to Sargent’s (1987) generation of equilibrium prices and quantities from difference equations that result from an optimization process.
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A geometric understanding of the relationship between endowments and price variations can be provided by the equilibrium manifold approach . If we denote by S the set of normalized prices, the equilibrium manifold E(r) ⊂ S × Ω(r) is the set of prices and endowments such that aggregate excess demand is zero. Let us denote by π : E(r) → Ω(r) the natural projection, i.e. the restriction to the equilibrium manifold E(r) of the projection (p, ω) 7→ ω from S × Ω(r) into Ω( r ) (see  and Section 3). The structure of the equilibrium manifold and the properness property of the natural projection (see Section 3) entail the existence of smooth selections of equilibrium prices: i.e., an infinitesimal change of regular endowments implies an infinitesimal change of the corresponding equilibrium price vectors. It is worth noting that this smooth selection property (SSP) is not a theory of equilibrium selection (for the existence of a continuous random selection see [9, p. 348] and ). As Balasko points out [2, p. 94], this structural stability property “should not be confused with stability in the sense of tatonnement”.
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From the arguments in the previous subsections we ﬁnd that the equilibrium prices of the good of each ﬁrm in all four situations (price setting ﬁrm in price-quantity competition, quantity setting ﬁrm in price-quantity competition, price-price com- petition and quantity-quantity competition) are equal, the equilibrium outputs and the equilibrium proﬁts of each ﬁrm in all situations are also equal.
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The first point is that the two sequences of production prices (and profits) are simply not the same. Two concepts are involved; one must choose between them. Figure 1 shows, first of all, the ratio of the temporal to the equilibrium prices of production and second, the ratio of the relative prices in both systems. Of course, equilibrium and temporal prices can be expected to differ in any case because of the arbitrary choice of numéraire in the equilibrium system. But this cannot account for all the difference since the two ratios move in opposite directions for the two sectors. Moreover the relative prices also diverge, which is not caused by the choice of numéraire.
Let’s consider the following problem. Let b ≥ 0, + > 0 &, ∈ ; be given. By which ℓ > 0, ] > 0 &, ∈ ; there exists the vector 8 = 8 , … , 8 , that for some : , … , : , 3 is an equilibrium prices without loss in the model 1, defined by the set 2ℓ, : , … , : , 3 7.
Finite lifetime models of the Cass and Yaari (1967) contribution have been recently revived. For example, Demichelis and Polemarchakis (2007) present an Arrow-Debreu (AD) endowment equilibrium with a structure similar to the one pre- sented here, but within the finite lifetime framework. Though we reach a similar solution for AD prices, our approach allows for a simpler characterization of equilib- rium prices, and, in particular for an explicit derivation of conditions for existence of speculative bubbles.
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Studies of QS’s in competitive markets with asymmetric information (see Leland, 1979; Shapiro, 1983; and Armstrong, 2008 for a review) have already indicated that some consumer groups might be harmed by the mandatory policy. However, these models do not account for the e¤ects of QS’s on prices. Studies of QS’s under oligopoly price competition (Ronnen, 1991; Crampes and Hollander, 1995) build on the decrease in prices brought about by the policy and conclude that the intervention is always welfare increasing. 17 In a duopoly model where …rms …rst choose quality and then prices, and face quality-dependent …xed costs, Ronnen (1991) shows that a QS intensi…es price competition by limiting vertical di¤erentiation and is bene…cial to consumers. Crampes and Hollander (1995) show, in a related duopoly model where the cost of quality is variable, that a QS might decrease consumer surplus. This happens if the increase in the low-quality brought about by the intervention triggers a signi…cant increase in the high- quality. 18 In this case, the increase in prices due to higher costs o¤sets the competitive e¤ect. In
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Finally, we can extend this dairy product supply model. So if we introduce one consumer sector and multiple supplier sectors into the dairy product supply model, then we can model a complete dairy products market. In this complete dairy products market model, we can also observe the same results as in the supply model, that is, economies of scale in transportation and accessibility advantage. In addition, if we adopt some assumptions, then we can prove the existence of an equilibrium. For example, suppose that there exists a continuous demand function of the consumers D : R + ! R + where D(p) denotes the amount of the products
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housing/neighborhood attributes. The housing market is assumed to be in equilibrium such that each household is assumed to have made an optimal location choice. Their empirical estimation strategy followed from Berry, Levinsohn and Pakes (1995), who developed a two- stage estimation that includes a contraction mapping to better handle the very large number of observations. In the empirical implementation, Bayer, McMillan, and Rueben analyzed residential sorting using the 1990 census micro data from the San Francisco Bay area. By defining housing type as location choice to reduce the number of observed houses, they keep the computation tractable. The results indicate residential sorting with respect to socio-
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One of the most powerful and widely used models in macro—and even struc- tural micro—is the Overlapping Generations (OLG) model first introduced by Samuelson in the 1950s. Consider the following standard OLG / life-cycle economy (different names, essentially the same thing). We will look only at steady state equilibrium. Consequently, aggregates such as capital and labor and the invariant distribution and prices will not have time indices. The time subscripts indicate a generation’s/household’s individual variables which do evolve period by period.
While a growing literature explores the impact of the shale revolution on the economy, the technology and financing features of the shale sector are rarely considered jointly, as well as their effects on oil prices within a unified modelling framework. In this paper we consider both technology and financing characteristics of shale producers to explore the production-price nexus. In particular, we document how the advent of shale oil has impacted oil prices through the producers’ supply and hedging pressure. Our analysis is both theoretical and empirical. First, we introduce shale producers in a consumption- based model of crude oil, in which prices are determined in equilibrium from the inter- action between producers and speculators in the oil futures market, following Acharya et al. (2013) (ALR henceforth). Our model shows that the peculiar characteristics of shale producers, both in terms of technology and financing structure, matter in equilibrium. Second, we empirically examine the drivers of the risk premium embedded in WTI fu- tures contracts before and after the advent of shale oil. By separately identifying conven- tional and shale producers in the US oil industry, we show that US shale companies have become one relevant driver of global spot and futures prices.
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conjectures. First, the house-price-to-income ratio is a constant in the long run (this con- jecture is hereafter denoted by M1 ). Second, house price changes do not directly depend on price lag, but instead on the house-price-to-income ratio (in both the current period and previous periods) in a format that exhibits certain features of an error-correction model (this conjecture is hereafter denoted by M2 ). Malpezzi’s paper clearly addresses the concerns of the general public in addition to those of oﬃcial agents, as the house- price-to-income ratio is often used as a measure of whether house prices have deviated from “fundamental” prices. For instance, the Wall Street Journal (2011) comments that “...For decades, price-to-income levels have moved in tandem, with a speci ﬁ c housing market’s prices rising or falling in line with local residents’ incomes. Many economists say that makes the price-to-income ratio a good gauge for determining whether housing is undervalued or overvalued for a given market.” Regardless of whether all economists would agree with this statement, it re ﬂ ects the situation as perceived by the media. In a research note of the Parliament of the United Kingdom, Keep (2012) comments that “The ratio of house prices to income is a key indicator of the relative aﬀordability of owner-
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Equations , in which the prices are independent of time, are supposed to be the stationary result of a process of adjustment of an economy under complete forward markets and/or perfect foresight. Therefore the system of production represented by the coefficients of  is the result of an intertemporal choice among alternative techniques and the choice of a unique numeraire, (in our case w(0) = 1), is necessary in order to compare the values of dated commodities. Instead the equations  do not derive from such assumptions. Any sequence of , t = 1,2,...,T, includes T independent systems of equations. As a consequence, the determination of the prices p t , ρ t , is self-contained in each period, given the
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by Arčabić et al. (2013) for Croatia. Another strong unidirectional causality has been found from GDP to stock prices, which is in concordance with the study findings by Tursoy and Faisal (2016) and specifies that growth is a good indicator in explaining stock prices, confirming the validity of the adoptive expectation model. A strong unidirectional causality exists that runs from financial development to FDI, which suggests that the increased impact of FDI on output in an economy can be further enhanced by adopting efficient policies that promote financial development. These findings are consistent with the study conducted by Ang (2009). As a result, the Chinese government can devise and plan efficient policies to attract more FDI to improve and promote their financial sector.
Sellers’ investment choices coincide too little with the best responses to past or future prices to be modeled by random utility based equilibrium (Mckelvey and Palfrey, 1995) or adjustment (Camerer and Ho, 1999) models. The only rationality we find is that sellers are slightly more likely to change from their current investment levels to one as least as profitable than to one no more profitable. Incorporating this minimal rationality, we formulate and esti- mate a Markov model of investment choice dynamics. When we consider the estimated price and investment dynamics together we show that, in expectation, they track the dynamics of our experimental data including the tendency for cobweb type cycles in investment/firm size and prices around competitive equilibrium levels. Moreover, this demonstrates that in the presence of only a modicum of seller rationality with respect to long run decisions the double auction trading institution can generate highly efficient outcomes.
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