nep-mic New Economics Papers
on Microeconomics
Issue of 2006‒09‒11
eight papers chosen by
Joao Carlos Correia Leitao
Universidade da Beira Interior

  1. Efficient collusion in optimal auctions By Dequiedt, V.
  2. Single or Multiple Pricing in Electricity Pools? By Ahmed Anwar
  3. Holiday Non-Price Rigidity and Cost of Adjustment By Georg Müller; Mark Bergen; Shantanu Dutta; Daniel Levy
  4. Compétitivité structurelle By Marcus Dejardin
  5. On Noncooperative Games, Minimax Theorems and Equilibrium Problems By Frenk, J.B.G.; Kassay, G.
  6. Pareto Improving Taxes By J. D. Geanakoplos; H. M. Polemarchakis
  7. Price Rigidity and Flexibility: New Empirical Evidence By Daniel Levy
  8. Regular adjustment - theory and practice. By Jerzy (Jurek) D. Konieczny; Fabio Rumler

  1. By: Dequiedt, V.
    Abstract: We study collusion in an IPV auction with binary type spaces. Collusion is organized by a third-party than can manipulate participation decisions. We characterize the optimal response of the seller to different threats of collusion among the bidders. We show that, contrary to the prevailing view that assymmetric information imposes transaction costs in side-contracting, collusion in the optimal auction is efficient when the third-party can implement monetary transfers as well as when it can implement monetary transfers and reallocations of the good. The threat of non-participation in the auction by a subset of bidders is crucial in constraining the seller's profit.
    JEL: D82
    Date: 2006
  2. By: Ahmed Anwar
    Abstract: We present a 2 bidder multi-unit, common cost auction model with uncertain demand and capacity constraints which ensure that the participants sometimes face a residual market share. The model is motivated by electricity pools. We show that a single-price auction where the bidders can submit only one bid for all units weakly dominates an auction where the bidders can make multiple-price bids in terms of average prices. In the case of uniform price auctions we give an example where the dominance is strict.
    Keywords: Electricity Pool, Multi-Unit Auction, Revenue Ranking
    JEL: D44 L13 L94
  3. By: Georg Müller; Mark Bergen; Shantanu Dutta; Daniel Levy
    Abstract: There has been increasing interest in understanding how firms undertake non-price adjustment activities, especially in situations where prices may be rigid despite changes in market conditions. Using scanner price data for over 4,500 different food products from a large US supermarket chain, we document periods of rigidity in product additions and deletions: new products are less likely to be introduced, and existing products are less likely to be discontinued during holiday periods than throughout the rest of the year. We argue that this is due to higher costs of undertaking these kinds of product assortment activities during holiday periods. We discuss how this relates to the exiting literature on non-price adjustment and price rigidity.
    Date: 2006–09
  4. By: Marcus Dejardin (FUNDP - Facultés Universitaires Notre-Dame de la Paix - [Faculté des Sciences économiques, sociales et de gestion])
    Abstract: L'article est à paraître dans la revue Reflets et perspectives de la vie économique. Il introduit le numéro consacré au thème de la compétitivité structurelle (RPVE, Tome XLV, n°1, 2006). La notion de compétitivité structurelle y est d'abord distinguée de manière schématique de la notion de compétitivité en prix. Vient ensuite un aperçu des contributions. L'article se conclut en se faisant très brièvement l'écho de l'actualité sociopolitique belge en matière de compétitivité.
    Keywords: compétitivité, compétitivité structurelle, compétitivité en prix
    Date: 2006–09–02
  5. By: Frenk, J.B.G.; Kassay, G. (Erasmus Research Institute of Management (ERIM), RSM Erasmus University)
    Abstract: In this chapter we give an overview on the theory of noncooperative games. In the first part we consider in detail for zero-sum (and constant-sum) noncooperative games under which necessary and sufficient conditions on the payoff function and different (extended) strategy sets for both players an equilibrium saddlepoint exists. This is done by using the most elementary proofs. One proof uses the separation result for disjoint convex sets, while the other proof uses linear programming duality and some elementary properties of compact sets. Also, for the most famous saddlepoint result given by Sion's minmax theorem an elementary proof using only the definition of connectedness is given. In the final part we consider n-person nonzero-sum noncooperative games and show by a simple application of the KKM lemma that a so-called Nash equilibrium point exists for compact strategy sets and concavity conditions on the payoff functions.
    Keywords: Non-Cooperative Game Theory;Minimax Theorems;Nash Equilibrium Point;KKM Lemma;Equilibrium Problems;
    Date: 2006–06–10
  6. By: J. D. Geanakoplos; H. M. Polemarchakis
    Date: 2006–09–02
  7. By: Daniel Levy
    Abstract: The marketplace, along with its price system, is the single most important institution in a western-style free enterprise economy. The ability of prices to adjust to changes in supply and demand conditions enables the market to function efficiently and lies behind the magical invisible hand mechanism. To the behaviour of prices and in particular to the ability of prices to adjust to changes in market conditions, therefore, have fundamental implications for many key issues in many areas of both microeconomics as well as macroeconomics. It is, therefore, critical to study and understand whether there are barriers to price adjustments, what are the nature of these barriers, how the barriers lead to price rigidity, what are possible implications of these rigidities, etc. This introductory essay briefly summarizes the fourteen empirical studies of price rigidity that are included in this special issue.
    Date: 2006–09
  8. By: Jerzy (Jurek) D. Konieczny (Department of Economics, Wilfrid Laurier University, Waterloo, Ontario, Canada, N2L 3C5.); Fabio Rumler (Oesterreichische Nationalbank, Otto Wagner Platz 3, A-1090 Vienna, Austria.)
    Abstract: We ask why, in many circumstances and many environments, decision-makers choose to act on a time-regular basis (e.g. adjust every six weeks) or on a state regular basis (e.g. set prices ending in a 9), even though such an approach appears suboptimal. The paper attributes regular behaviour to adjustment cost heterogeneity. We show that, given the cost heterogeneity, the likelihood of adopting regular policies depends on the shape of the benefit function - the flatter it is, the more likely, ceteris paribus, is regular adjustment. We provide sufficient conditions under which, when policy makers differ with respect to the shape of the benefit function (as in Konieczny and Skrzypacz, 2006), the frequency of adjustments across markets is negatively correlated with the incidence of regular adjustments. On the other hand, if policy makers differences are due to the level of adjustment costs (as in Dotsey, King and Wolman, 1999), then the correlation is positive. To test the model we apply it to optimal pricing policies. We use a large Austrian data set, which consists of the direct price information collected by the statistical office and covers 80% of the CPI over eight years. We run cross-sectional tests, regressing the proportion of attractive prices and, separately, the excess proportion of price changes at the beginning of a year and at the beginning of a quarter, on various conditional frequencies of adjustment, inflation and its variability, dummies for good types, and other relevant variables. We find that the lower is, in a given market, the conditional frequency of price changes, the higher is the incidence of time- and state-regular adjustment. JEL Classification: E31, L11, E52, D01.
    Keywords: Optimal pricing, attractive prices, menu costs.
    Date: 2006–08

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