Demand Rationing Research Articles

Do Financial Linkages Ease the Credit Rationing of Forest Rights Mortgage Loans? Evidence from Farm Households in Fujian Province, China

Affected by the small scale of forest farmers’ land and the imperfect development of the forest land transfer market, China’s forest rights mortgage loans have suffered from more serious credit rationing. The application of financial linkage theoretically has the effect of solving credit rationing. However, previous studies on financial linkages have focused on the field of credit lending, whereas the applied studies in the field of mortgage lending are mainly case studies on transaction models, and empirical tests on the application of financial linkages in mortgage lending are lacking. Therefore, to fill this gap, this study analyzed the effect of financial linkage on credit rationing for forestry mortgage loans and the mechanism of action through a study of farmers in Fujian, one of the key collective forestry areas in China, using the PSM method with 785 sample values. The results show the following: (1) Financial linkages have a significant mitigating effect on supply rationing, demand rationing, and the total rationing of forest rights mortgage loans. Compared to non-participation, financial linkages significantly reduced total rationing by 15.2%, with a 5% reduction in supply rationing and a 10.2% reduction in demand rationing. (2) The impact of financial linkage differs significantly among heterogeneous farmers. It has a significant mitigating effect on supply rationing for small-scale farmers, but not for large-scale farmers; meanwhile, it better mitigates demand rationing for large-scale farmers than for small-scale farmers. (3) In the mechanistic test, financial linkages were found to moderate the relationship between the value of collateral and supply rationing for small-scale farmers, and transaction costs play an intermediary role in the relationship between financial linkages and demand-based rationing. According to the study results, in order to promote the development of forest rights mortgage loans, it is necessary to develop different lending strategies for heterogeneous farmers, to further encourage small- and medium-sized farmers to participate in financial linkages, as well as to further reduce the related transaction costs.

ТРЕНДИ СПОЖИВЧОЇ ПОВЕДІНКИ ДОМОГОСПОДАРСТВ НА ПРОДОВОЛЬЧОМУ РИНКУ УКРАЇНИ

The article outlines the peculiarities of consumer behavior of households in the food market of Ukraine. The importance of studying the peculiarities of the formation of consumer behavior of households in the food market of Ukraine in modern socio-economic conditions is outlined. In analyzing the behavior of consumers in the food market, three periods of its formation are distinguished. Changes in consumer practices of Ukrainian households over the past ten years have been analyzed. Trends in consumer behavior of households that prevailed until 2020 were determined. Among them are the growth of retail turnover of grocery chains, the development of electronic commerce, the dependence of the choice of store type on the level of household income, the active development of local trade networks and the growing demand for organic products. The peculiarities of the second period of the formation of consumer trends that began with the beginning of the COVID-19 pandemic are considered. In particular, the purchase of the most necessary goods, the reduction of impulsive purchases, the importance of the product price when making a purchase, the popularization of food and ready-made food delivery services, and the increase in online shopping by households. The consumer behavior trends of households that arose due to the beginning of the full-scale Russian invasion are indicated. The following trends in consumer behavior of households at the beginning of last year can be distinguished: reduction of household expenditures on food products, lack of food consumption, cash purchases, the spread of survival strategies in consumer behavior of households, giving preference to cheaper products by households, borrowing money by households, increase in the average number of households, and change of residence by households. The study of the consumer behavior of Ukrainians during the 10 months of the full-scale invasion made it possible to single out slightly different consumer trends. In particular, the rationalization of demand, consumers' attention to the brand when making a purchase, and growing demand for Ukrainian brands.

Government regulations to mitigate the shortage of life-saving goods in the face of a pandemic

During a pandemic, it is essential to secure a broad allocation of life-saving goods, such as medical and protective products, to save lives. However, these goods are often in short supply, due to consumer hoarding, insufficient manufacturing capacity and price gouging. Herein, we develop a game-theoretic supply chain model to evaluate the impact of government regulations on the shortage of life-saving goods and profit within the supply chain. Our model considers three types of regulation: (i) price regulation in the form of a price cap, (ii) purchase regulation or demand rationing and (iii) a combination thereof. The most distinguishing feature of our model is that it captures consumer panic buying, insufficient capacity, price surges and controls on the supply and demand side of the supply chain that are widely observed during a pandemic. The results establish reasonably simple prescriptions for policymakers to design effective and easy-to-implement regulations to mitigate shortages of critical supplies in the face of a pandemic.

Blending Capacity on a Rideshare Platform: Independent and Dedicated Drivers

A rideshare platform acts as an aggregator that connects riders with ride providers (drivers). The drivers are independent workers who share a part of their revenue with the principal, who owns the platform. While drivers have flexible schedules, the fairness of labor contracts and control exercised by the principal have come into question lately. Suggested options include treating the drivers as employees and/or safeguarding a minimum income for them. We study a rideshare platform with blended driver capacity: full time employees with a fixed wage rate, and independent drivers who are paid a share of revenue. We examine a scenario where the principal establishes the number of employee drivers, revenue sharing, and a base price for the platform; and the independent drivers then determine whether to join the platform. We identify economic equilibrium for two different demand rationing strategies: preference for employee drivers, and equal opportunity for all drivers (driver‐agnostic). We find that a blended platform capacity becomes viable if the wage rate is moderate, pool of independent drivers is large, and the ride‐seeker market is large. We show that the unpredictability of driver's reservation value motivates the principal to hire more employee drivers and to increase the base price. Our result that a driver‐agnostic demand rationing causes fewer independent drivers to join the platform is somewhat counterintuitive and is explained by how revenue sharing affects demand rationing. We find that the ride seekers prefer preferential demand rationing over driver‐agnostic rationing.

Government Regulations to Mitigate the Shortage of Life-Saving Goods in the Face of a Pandemic

During a pandemic, it is essential to secure a broad allocation of life-saving goods, such as medical and protective products, to save lives. However, these goods are often in short supply, due to consumer hoarding, insufficient manufacturing capacity and price gouging. Herein, we develop a game-theoretic supply chain model to evaluate the impact of government regulations on the shortage of life-saving goods and profit within the supply chain. Our model considers three types of regulation: (i) price regulation in the form of a price cap, (ii) purchase regulation or demand rationing and (iii) a combination thereof. The most distinguishing feature of our model is that it captures consumer panic buying, insufficient capacity, price surges and controls on the supply and demand side of the supply chain that are widely observed during a pandemic. The results establish reasonably simple prescriptions for policymakers to design effective and easy-to-implement regulations to mitigate shortages of critical supplies in the face of a pandemic.

Cost Optimization in the (S-1, S) Backorder Inventory Model with Two Demand Classes and Rationing

Within the framework of continuous-review (S-1, S) inventory systems with rationing and back-orders, there are two streams of studies in the literature that involve optimization models. In the first stream, service level optimizations are studied for which exact optimization routines are provided. The second stream of studies involves cost optimization models, which relies on optimizing approximate cost models rather than the original cost model. Our main contribution in this study is to fill this research gap by providing a computationally efficient and exact optimization algorithm for determining the optimal policy parameters which minimizes the expected cost rate per unit time. One important aspect of our method is that, as the base-stock level is increased by 1 as the iteration continues, the steady-state probabilities need to be calculated only once in our optimization routine (for which the rationing level equals to zero). For the given base-stock level, the cost measures of all other policy parameters can be computed immediately through the knowledge of the probabilities computed in previous iterations. This result significantly reduces the computational complexity of the optimization routine. In the numerical study section, we show the efficiency of the proposed optimization routine under varying system parameters.

Analysis of imperfect competition in natural gas supply contracts for electric power generation: A closed-loop approach

Comision Nacional de Investigacion Cientifica y Tecnologica (CONICYT) CONICYT FONDECYT 1190228 Comision Nacional de Investigacion Cientifica y Tecnologica (CONICYT) CONICYT FONDECYT 1181928 SERC-CHILE CONICYT/FONDAP/15110019 CONICYT-Basal Project FB0008 Complex Engineering Systems Institute ANID PIA/APOYO AFB180003 ANID/PIA/ACT192094

Measuring the effects of price controls using mixed complementarity models

Government involvement in managing domestic prices of energy and other commodities is a major issue in emerging economies. We examine one aspect of the problem, price controls, when governments set or cap prices. We show how a Mixed Complementarity Problem (MCP) formulation can be used to model and assess the impacts of price controls in multi-sector economic-equilibrium models. Both the gains from deregulation and the consequences of imposing new or altering existing regulations can thus be measured. We present three distinct models that capture different price-control situations: firms have to meet demand and receive an implicit subsidy, demand rationing occurs due to an associated price control constraint, and subsidies limit demand rationing. We present an approach to measuring the effects on the equilibrium in the first case and the levels of disequilibrium induced by price controls in the other cases. We also show how to determine the most efficient allocation program when a government engages in rationing. We illustrate the cases described by these models using markets that have or had price controls.

Labor Supply Under Participation and Hours Constraints: An Extended Structural Model for Policy Evaluations

The paper extends a static discrete-choice labor supply model by adding participation and hours constraints. We identify restrictions by survey information on the eligibility and search activities of individuals as well as actual and desired hours. This provides for a more robust identification of preferences and constraints. Both, preferences and restrictions are allowed to vary by and are related through observed and unobserved characteristics. We distinguish various restrictions mechanisms: labor demand rationing, working hours norms varying across occupations, and insufficient public childcare on the supply side of the market. The effect of these mechanisms is simulated by relaxing different constraints at a time. We apply the empirical frame- work to evaluate an in-work benefit for low-paid parents in the German institutional context. The benefit is supposed to increase work incentives for secondary earners. Based on the structural model we are able to disentangle behavioral reactions into the pure incentive effect and the limiting impact of constraints at the intensive and extensive margin. We find that the in-work benefit for parents substantially increases working hours of mothers of young children, especially when they have a low education. Simulating the effects of restrictions shows their substantial impact on employment of mothers with young children.

Labor Supply under Participation and Hours Constraints

The paper extends a static discrete-choice labor supply model by adding participation and hours constraints. We identify restrictions by survey information on the eligibility and search activities of individuals as well as actual and desired hours. This provides for a more robust identification of preferences and constraints. Both, preferences and restrictions are allowed to vary by and are related through observed and unobserved characteristics. We distinguish various restrictions mechanisms: labor demand rationing, working hours norms varying across occupations, and insufficient public childcare on the supply side of the market. The effect of these mechanisms is simulated by relaxing different constraints at a time. We apply the empirical frame- work to evaluate an in-work benefit for low-paid parents in the German institutional context. The benefit is supposed to increase work incentives for secondary earners. Based on the structural model we are able to disentangle behavioral reactions into the pure incentive effect and the limiting impact of constraints at the intensive and extensive margin. We find that the in-work benefit for parents substantially increases working hours of mothers of young children, especially when they have a low education. Simulating the effects of restrictions shows their substantial impact on employment of mothers with young children.

Dynamic Supply Risk Management with Signal‐Based Forecast, Multi‐Sourcing, and Discretionary Selling

We examine the critical role of advance supply signals—such as suppliers’ financial health and production viability—in dynamic supply risk management. The firm operates an inventory system with multiple demand classes and multiple suppliers. The sales are discretionary and the suppliers are susceptible to both systematic and operational risks. We develop a hierarchical Markov model that captures the essential features of advance supply signals, and integrate it with procurement and selling decisions. We characterize the optimal procurement and selling policy, and the strategic relationship between signal‐based forecast, multi‐sourcing, and discretionary selling. We show that higher demand heterogeneity may reduce the value of discretionary selling, and that the mean value‐based forecast may outperform the stationary distribution‐based forecast. This work advances our understanding on when and how to use advance supply signals in dynamic risk management. Future supply risk erodes profitability but enhances the marginal value of current inventory. A signal of future supply shortage raises both base stock and demand rationing levels, thereby boosting the current production and tightening the current sales. Signal‐based dynamic forecast effectively guides the firm's procurement and selling decisions. Its value critically depends on supply volatility and scarcity. Ignoring advance supply signals can result in misleading recommendations and severe losses. Signal‐based dynamic supply forecast should be used when: (a) supply uncertainty is substantial, (b) supply‐demand ratio is moderate, (c) forecast precision is high, and (d) supplier heterogeneity is high.

Number of Firms, Rationing, Matching, and Knowledge: A Comprehensive Study of Variations in Experimental Kreps–Scheinkman Markets

Abstract This study provides a comprehensive picture of experimental Kreps–Scheinkman markets with capacity choice in the first stage and subsequent price competition in the second. We conduct seven different treatments of such markets, varying the number of firms, demand rationing, subject matching, and subjects’ knowledge about the market mechanism. We find that only the number of firms has a persistent effect on capacity choices, whereas price choices are affected by both the number of firms and the rationing scheme. From the outset, subjects in the high-knowledge condition behave in the same way as subjects with low knowledge do in later periods after gaining experience. In all treatments, conduct is more competitive than the Cournot outcome, irrespective of the Nash equilibrium prediction. Nevertheless, the Cournot model does pack some predictive power. Under efficient demand rationing where the Cournot outcome is predicted, exact Cournot choices are more likely for both capacities and prices.

Public Reporting and Demand Rationing: Evidence from the Nursing Home Industry.

This paper examines an under-explored unintended consequence of public reporting: the potential for demand rationing. Public reporting, although intended to increase consumer access to high-quality products, may have provided the perverse incentive for high-quality providers facing fixed capacity and administrative pricing to avoid less profitable types of residents. Using data from the nursing home industry before and after the implementation of the public reporting system in 2002, we find that high-quality nursing homes facing capacity constraints reduced admissions of less profitable Medicaid residents while increasing the more profitable Medicare and private-pay admissions, relative to low-quality nursing homes facing no capacity constraints. These effects, although small in magnitude, are consistent with provider rationing of demand on the basis of profitability and underscore the important role of institutional details in designing effective public reporting systems for regulated industries.

Public Reporting and Demand Rationing: Evidence from the Nursing Home Industry

This paper examines an under-explored unintended consequence of public reporting: the potential for demand rationing. Public reporting, though intended to increase consumer access to high quality products, may have provided the perverse incentive for high-quality providers facing fixed capacity and administrative pricing to avoid less profitable types of residents. Using data from the nursing home industry before and after the implementation of the public reporting system in 2002, we find that high-quality nursing homes facing capacity constraints reduced admissions of less profitable Medicaid residents while increasing the more profitable Medicare and private-pay admissions, relative to low-quality nursing homes facing no capacity constraints. These effects, though small in magnitude, are consistent with provider rationing of demand based on profitability and underscore the important role of institutional details in designing effective public reporting systems for regulated industries.

Consumer Rationing and Cournot Outcomes: Experimental Evidence

[Author Affiliation]Jason J Lepore, * Department of Economics, Orfalea Business College, California Polytechnic State University, San Luis Obispo, CA 93407, USA; E-mail: jlepore@calpoly.edu .Aric P Shafran, [dagger] Department of Economics, Orfalea Business College, California Polytechnic State University, San Luis Obispo, CA 93407, USA; E-mail: ashafran@calpoly.edu ; corresponding author.[Acknowledgment]The authors acknowledge the Orfalea College of Business for financial support. We thank Blake Allison for assistance running the experiments and the anonymous reviewers and conference participants at the North American Economic Science Association Meetings for helpful comments.1. IntroductionThis article reports the results of duopoly market experiments where firms first commit to capacities and then compete in prices. The theoretical literature pertaining to these duopoly models suggests that the way residual demand is rationed is fundamental to the character of equilibrium outcomes. The goal of this study is to test the impact of residual demand rationing on the behavior of subjects in an experimental environment.In a two-stage game, where firms first commit to capacities and then compete in prices, Kreps and Scheinkman (1983; hereafter K&S) prove that the unique Nash equilibrium outcome coincides with the Cournot equilibrium outcome with efficient rationing of residual demand. Efficient rationing means that the higher-priced firm is left with the worst possible residual demand curve. If demand is composed of many similar consumers that each demand multiple units and we construct aggregate demand by way of a representative consumer, then efficient rationing is imposed by the model. On the other hand, if demand is instead composed of a mass of consumers with unit demand and varied willingness to pay, then the efficient rationing rule imposes the restriction that the highest-valued consumers buy from the firm with the lower price. Davidson and Deneckere (1986) make a compelling argument that proportional rationing is a more appropriate assumption in the latter case. Proportional rationing means that a uniform distribution of possible consumers buy from the firm with the lower price. Davidson and Deneckere show that under proportional rationing (as well as any rationing rule other than the efficient rule), the Cournot outcome is not necessarily the unique equilibrium of the two-stage game. The Davidson and Deneckere result is problematic for the K&S model because it deflates the generality of their theoretical result.1Lepore (2009) further clarifies the relationship between proportional rationing and the Cournot outcome. In the K&S game with proportional rationing, the Cournot outcome is the unique Nash equilibrium only when capacity cost is greater than a threshold level. The purpose of our experiments is to assess if the play of experimental subjects in the two-stage game is sensitive to the rationing scheme in the way that theory predicts. To do this, we construct an experimental design with four treatments. The treatments vary by two controls: the demand-rationing scheme and the cost of capacity. We conduct two efficient rationing treatments, one with a high capacity cost and one with a low cost. For both costs, theory predicts that the outcome coincide with the Cournot model. We also conduct two treatments using proportional rationing, one with each of the capacity costs used in the efficient rationing treatments. With a high cost, theory predicts the outcome should coincide with the Cournot model, as in the case of efficient rationing. However, theory predicts that the Cournot outcome should not occur when the cost of capacity is low, and prices should not clear the market.Recently several authors have used laboratory experiments as a means to empirically test the predictions of the K&S model. …

What a Difference a Sum Makes: Agony and Ecstasy in the Rationalization of Demand

Most historical discussions of Arrow-Debreu general equilibrium theory discuss the negative impact of the so-called Sonnenschein-Mantel-Debreu (SMD) results on aggregate excess demand functions. This paper argues that the SMD results were a natural extension of the integrability literature of the period 1959-71 - something that has not been recognized in the historical literature - and considers some of the implications of this for the history of modern economic thought.

South Asian Broadband Service Quality: Diagnosing the Bottlenecks

The developing countries have lately experienced a surge in mobile phone adoption. New investment into the telecom sector has enabled network roll-out, and increasingly innovative business models have driven down network operation costs and customer acquisition & retention costs, enabling pricing to be lowered significantly (Samrajiva, 2009). The result is that people who, just a few years ago were unable to afford any form of telephone are now purchasing mobile phones and SIM cards and using them to make calls and send SMS. Given the dearth of fixed access networks, developing nations, especially those in South Asia, depend mobile phones to take their citizens online. All these new consumers are naturally creating increased demand for Internet capacity. At the same time, the demand for Internet access capacity is increasing because many South Asian countries (particularly India, and to a less extent others such as Sri Lanka) have been at the forefront of attracting a significant share of the booming market for business process outsourcing. While new consumer numbers are growing, tests performed by LIRNEasia in India, Bangladesh and Sri Lanka show that users get low value for money from their broadband connections when compared to North American counterparts. Using only data publically available, we could hypothesize that the poor performance of South Asian broadband in terms of throughput (upload speed, download speed), jitter, latency and other measurable dimensions is due to the lack of international capacity (as opposed to the local access network capacity or in-country back haul capacity). For example, we know that while the region has surging demand, the supply of international connectivity has not caught up to the demand (Telegeography, 2010). Therefore South Asian internet service providers end up paying significantly higher fees for international connectivity when compared even to their East Asian peers (Telegeography, 2009). We test our hypothesis using a broadband quality of service testing methodology developed jointly by LIRNEasia and the Indian Institute of Technology, Madras. The results confirm that international connectivity is indeed a significant choke point when accessing the Internet and negatively impacts the service quality of broadband. Individual countries or individual ISPs cannot do much in the immediate or near term to increase international leased line capacity and prices (due to relatively long lead times required to actually lay the cable, and the seemingly longer time some countries require to agree on the rules related to the consortia that participate in the cable). However, our testing provides data on a second choke point, one that is very much within the control of the ISPs. The points where two or more ISPs exchange traffic (network access points/NAPs, or Internet exchanges/IXPs) turn out to be choking points also. While ISPs in smaller/developing countries may not have control over international NAPs/peering points, the local NAPs and IXPs are very much within their control. Real-world examples show that when a country sets up at least one IXP, it is able to achieve a significant rationalization of demand for international capacity because local traffic is kept local, instead of being exchanged internationally. The resulting lower cost and higher quality of the connectivity justifies the relatively small investment required to set up an IXP. However due to a host of issues, it is possible to have an IXP and not get the benefits – we show quality testing data from India (which has a network of IXPs) that confirms this. Therefore while we push strongly for the establishment of IXPs, we will caution about getting the technical models and business incentives aligned towards its proper functioning.

Reducing risk of shortages due to drought in water supply systems using genetic algorithms

AbstractThe evaluation of risk of shortages due to drought in water supply systems is a necessary step both in the planning and in the operation stage. A methodology for unconditional (planning) and conditional (operation) risk evaluation is presented in this study. The risk evaluation is carried out by means of an optimisation model based on genetic algorithms aimed to define thresholds for the implementation of mitigation measures tested through Monte Carlo simulation that makes use of a stochastic generation of streamflows. The GA enables the optimisation of reservoir storages which identify monthly thresholds for shifting three states of the system (normal, alert and alarm) to which correspond different mitigation measures such as water demand rationing, additional supplies from alternative sources or reduction of release for ecological use. For unconditional risk evaluation a long time horizon has been considered (40 years), while the conditional risk evaluation is performed on a short time horizon (2–3 months). Results of simulations have been studied by means of consolidated indices of performance and frequency analysis of shortages of a given entity corresponding to different planning/management policies. A multi‐use water system has been used as a case study including competing irrigation and industrial demands. Copyright © 2008 John Wiley & Sons, Ltd.

Price Flexibility and Debt Dynamics in a High Order AS-AD Model

In this paper we reconsider extensions and modifications of earlier work on a disequilibrium model of AS-AD growth. Our dynamic model exhibits more or less sluggishly adjusting prices and quantities, Keynesian demand rationing and fluctuating capacity utilization for both labor and capital. Firms use debt (and pure profits) to finance their investment expenditures. We first prove that the resulting 7D core dynamics are convergent (broadly speaking) for low adjustment speeds. We then demonstrate partly analytically and partly numerically that their interior steady state will lose asymptotic stability by way of Hopf bifurcations when relevant adjustment speeds are made sufficiently large. This holds in particular for debt deflation, where falling price levels (caused by price flexibility that is sufficiently high) cause significantly increasing real debt, falling investment and shrinking economic activity. This deepens the deflationary process already under way. Such an instability result even occurs in the case where accompanying real wage increases would support economic stability.

Deterministic price–inventory management for substitutable products

Revenue management involves the use of pricing and inventory control strategies to balance supply and demand in a revenue-maximising manner. Although pricing and inventory control decisions are closely related, they have historically been considered in isolation in both industry and academic work. This paper adds to the recent research stream on joint pricing and inventory control by investigating static deterministic optimisation models for firms managing multiple products sharing multiple resources. Firms must manage both sales (demand rationing) and pricing decisions in order to maximise profits. This paper shows that, under standard regularity assumptions on demand, the deterministic joint price–inventory control problem with substitutable products can be reduced to a pure pricing problem. This is not true if demand is uncertain and/or products exhibit complementary effects, in which case demand rationing can be profitable. Illustrative examples that consider linear demand with and without substitution effects are provided. In this case, the price–inventory control problem can be solved by optimising a concave quadratic objective function with linear constraints. Practical applications of the models, which have been successfully used by several industries, are presented.