Market Demand Elasticity Research Articles

Impact of Bankruptcy on Firms Performance

Bankruptcy represents a critical event in the lifecycle of a firm, profoundly affecting its operational, financial, and strategic dimensions. This study aims to provide a comprehensive analysis of the impact of bankruptcy on firm performance, exploring various facets of its implications on both short-term and long-term operational effectiveness, financial health, and market position. The research adopts a mixed-method approach, integrating quantitative analysis of financial data with qualitative insights from case studies and expert interviews. Firstly, the study examines the immediate consequences of bankruptcy, such as disruptions in operations, loss of market trust, and creditor actions. It investigates how these factors contribute to declines in revenue, profitability, and market share in the short term, often leading to asset liquidation and restructuring efforts. Moreover, the research delves into the long-term repercussions of bankruptcy, including the enduring effects on organizational reputation, employee morale, and stakeholder relationships. It investigates the challenges faced by firms in regaining market credibility, attracting investment, and rebuilding their competitive advantage post-bankruptcy. Furthermore, the study analyses the role of management strategies, such as turnaround initiatives and reorganization efforts, in mitigating the negative impacts and facilitating recovery. Additionally, the research explores the sector-specific dynamics of bankruptcy effects, considering variations in industry regulations, market competition, and technological disruptions. It investigates how factors such as industry concentration, market demand elasticity, and technological obsolescence influence the severity and duration of performance decline following bankruptcy. Overall, the findings of this study contribute to a deeper understanding of the multifaceted implications of bankruptcy on firm performance, offering insights for managers, policymakers, and investors in navigating the challenges associated with financial distress and facilitating sustainable recovery strategies.

Platform business models and strategic price interaction

Business platforms delivering Mobility-as-a-Service (MaaS), alongside providing additional user services, have been shown to bring important price strategic interaction impacts which can be welfare improving. We show that the Integrator platform, whose structure alleviates harmful price externalities with two operators, such that it everywhere welfare dominates the Free-Market, can also limit beneficial competitive forces with more operators, reversing this welfare ordering. This is important since MaaS envisages platforms bringing together multiple operators and services in practice. However, calibrations show that where the Integrator platform fails to outperform the Free-Market (with higher operator numbers and lower substitutability), a new platform-based model that we introduce, is optimal. Furthermore, the Integrator is promoted in welfare terms in the presence of non-trivial marginal costs and mid- to high-end market demand elasticities, conditions both consistent with the inclusion in the MaaS journey mix of taxi cabs and other on-demand services which are common-place in MaaS offerings. We also introduce a number of extensions to the modelling framework incorporating additional real network characteristics. Though this can result in the welfare supremacy of the Integrator relative to the Free-Market being undermined, it again tends to be restored under mid- to high-range market elasticity calibrations. Finally, profit incentives tend to neither align across platform providers and operators, nor promote the welfare-best regime, indicating potential for regulatory oversight.

The nexus of ESG requirements and industry concentration

AbstractThis paper examines the environmental, social, and governance (ESG) requirements for an industry in an n‐oligopolistic model and investigates the relationship between the degree of industry concentration and the degree of ESG requirements. It is shown that the factors influencing the degree of ESG requirements include the number of firms, the elasticity of market demand, and the market concentration ratio. In the case of linear market demand, the degree of requirements is negatively affected by firm number only, regardless of the elasticity of market demand or market concentration ratio. In addition, the degree of ESG requirements is positively (negatively) related to the industry profit/concentration, when market demand is convex (concave). This paper demonstrates that the degree of ESG requirements is sensitive to firm number, market demand, and market concentration ratio and serves as a pragmatic reference for the government.

Mathematical insights into interval solutions of fuzzy relation inequalities for effective Information resource sharing in business education

To examine the connectivity of educational and business institution networks and assess their resource accessibility, we have employed min-max fuzzy relation systems. This piece aims to delve into the outcomes resulting from various factors within a three-compartmental financial system. The research undergoes the dynamical max-min fuzzy solutions, which are expressed in an interval format. These solutions take into consideration variables such as the price index, interest rate, investment demand, fluctuations, cost per investment derived from saved funds, and the elasticity of market demand within the commercial sector. These variables are essential for comprehending the dynamics of the three-compartment financial system. It is difficult to obtain the entire set of solutions for the max-min fuzzy relation system using only minimal solutions. Some of these systems can be solved using optimized fuzzy relation models for both maximal and minimal solutions. Therefore, by converting the business market's financial system into a max-min fuzzy relation inequality, the strategy presented in this article tries to get the broadest and changing solution fluctuating between minimal and maximal solutions. With this suggested strategy for solving the problem, the limiting upper and lower values within which the given quantities fluctuate are identified. By measuring the breadth of the resulting interval, the range of fluctuation may be identified, giving a thorough insight into the system's behaviour. Due to the potential instability of market agents and their respective influences, fluctuations may occur in the demand, supply, and prices of indices in the financial system. Consequently, presenting the financial system in the format of the widest fuzzy interval solution can provide easily accessible information to the general public by illustrating the max-min fuzzy relation system of financial dynamics, outlining the necessary steps, and including a numerical example.

An econometric investigation of EU's import demand for fresh potato: a source differentiated analysis focusing on Egypt

PurposeA better understanding of the determinants of demand through accurate estimates of the elasticity of import demand can help policymakers and exporters improve their market access and competitiveness. This study analyzed the EU's demand for imported potato from major suppliers between 1994 and 2018, with the aim to evaluate the competitiveness of Egyptian potato.Design/methodology/approachThis study adopted an import-differentiated framework to investigate demand relationships among the major potato suppliers to the EU's. To evaluate the competitiveness of Egyptian potato on the EU market, expenditure and price demand elasticities for various suppliers were calculated and compared.FindingsThe empirical results indicated that as income allocation of fresh potatoes increases, the investigated EU markets import more potatoes from other suppliers compared to imports from Egypt. The results show that EU importers may switch to potato imports from other suppliers as the import price of Egyptian potatoes increases, which enter the EU markets before domestically produced potatoes are harvested.Research limitations/implicationsDue to data unavailability, the present study relied on yearly data on quantities and prices of EU potato imports. A higher frequency of observations should allow for considering seasonal effects, and thereby providing a more transparent picture of market dynamics and demand behavior of EU countries with respect to potato import from various sources of origin.Originality/valueThe study used a system-wide and source differentiated approach to analyze import demand. In particular, the empirical approach allowed for comparing different demand models (AIDS, Rotterdam, NBR and CBS) to filter out the superior and most suitable model for that data because the suitability and performance of a demand model depends rather on data than on universal criteria.

Impact Assessment of Non-Radical Innovations on the Efficiency of a Higher Educational Institution (on the Example of Southwest State University)

Relevance. Growing competition, including in the field of higher education, generates a demand for economic models that explain the factors in the formation of competitive advantages and predict the impact of non-radical innovations on prices, student recruitment and financial results.The purpose is development of a Cournot model of oligopoly competition in conditions of constant price elasticity of demand and its application to the regional higher education marketObjectives: development of a Cournot oligopoly model with constant elasticity of demand; computer modeling at different values of the marginal costs of oligopolists; application of the model to the higher education market and finding the value of the marginal cost of training an additional student; calculation of the value of the market elasticity of the training of architects; finding the expected forecast values of prices, the number of enrolled students and financial results.Methodology. The article was prepared within the framework of the positivist paradigm and the adductive approach, using the methods of mathematical modeling, comparative statics and economic analysis.Results. A model of oligopolistic competition in terms of output volumes for a situation of constant elasticity of market demand has been built; shows the impact of the introduction of non-radical innovations on economic efficiency in the context of changes in exogenous variables; calculated the value of elasticity in the regional market of educational services in the direction of "Architecture", and also the marginal costs of training a student in the direction of "Architecture"; forecasted changes in financial results in SWSU and KSU as a result of the introduction of nonradical innovation.Conclusions. Application of the model to the regional market of higher education (admission of bachelors in faculty "Architecture" at SWSU and KSU in 2020) showed the planned increase in the market share from 10,3% to 12,4% as a result of the introduction of non-radical innovations, which led to a 13% decrease radical costs. The projected increase in the net income of the innovator's organization will be from 21,2% to 49,2% in the regional higher education market ("Architecture").

The impact of environmental regulation on firm performance: Evidence from the Chinese cement industry

The relationship between environmental regulation and firm performance is a central question in environmental economics. Although many empirical works study this question, economists have not reached a consensus on the nature of the relationship or the mechanism that drives it. Based on the off-peak production policy in the Chinese cement market, this paper uses the differences-in-differences model to study the impact of environmental regulation on the revenue and profit of listed companies. We find that the environmental regulation has negative impacts on firms’ revenue and profit. According to further analysis, the main reason for this firm performance decline is that the relatively large elasticity of market demand prevents enterprises from passing regulatory costs through to consumers. Although the policy has caused the cement price to increase by 8%, it has led cement consumption to decrease by 16%.

NATURE AND SALIENT FEATURES OF PAKISTAN’S MANUFACTURING SECTOR: A COMPREHENSIVE INSIGHT

The study investigates the nature and salient features of Pakistan’s manufacturing sector by focusing on the structure, conduct and performance aspects for 2004-2018. In structural analysis, Pakistan State Oil Company Ltd has turned out to be the largest firm according to gross sales criterion while Oil & Gas Development. Co. Ltd is classified as the largest firm according to the total assets criterion. Six industries are categorized as most heavily concentrated industries, five industries are in moderately concentrated industries while four industries are placed in the least heavily concentrated industries according to four-firm concentration criterion while according to Herfindahl-Hirschman Index principle, six industries are characterized as highly concentrated industries, two industries are in moderately concentrated industries while seven industries are placed in low concentrated industries. Demand and market conditions point out the disparity between the own-price elasticity of market demand and the own-price elasticity of a firm’s product. In conduct analysis, Learner’s index shows that there is imperfect competition in Pakistan’s manufacturing sector. The chemicals & Pharmaceuticals industry has come out with high advertising while the Petroleum Products industry has the lowest advisement intensity. In performance analysis, Spinning, Weaving has more gross profit to sales ratio while Electrical Machinery & Apparatus has the lowest gross profit to sales ratio. The Motor Vehicles industry is at the top for Charnes-Cooper-Rhodes (CCR), BankerCharnes-Cooper (BCC) criteria while for scale efficiency, the cement industry stands at the apex

Flow-Driven ESG Returns

I show that the performance of ESG investments is strongly driven by price-pressure arising from flows towards sustainable funds, causing high realized returns that do not reflect high expected returns. The coefficient linking ESG flows and realized returns is the product of two factors: The deviation of green funds' portfolios from the market portfolio and a flow multiplier matrix that is the inverse of the market's demand elasticity of substitution between stocks. Empirically, withdrawing 1 dollar from the market portfolio and investing it in the representative ESG fund increases the aggregate value of high ESG-taste stocks by 2-2.5 dollars. Under the absence of flow-driven price pressure, the aggregate ESG industry would have strongly underperformed the market from 2016 to 2021. Furthermore, the positive alpha of a long-short ESG taste portfolio becomes significantly negative.

Elasticity of tourism demand by income and price: evidence from domestic tourism of countries in ASEAN

In recent years, there have been many publications about the elasticity of international tourism market demand by income and prices, but there is still quite little about domestic tourism demand. T...

The dynamics of groundwater markets: Price leadership and groundwater demand elasticity in the Murrumbidgee, Australia

Groundwater over-extraction is a problem facing many countries around the world. Water pricing and developing property rights to enable groundwater trade are potential demand-based approaches to address the over-extraction of groundwater resources. However, successful implementation of groundwater trading requires knowledge about groundwater demand and its interaction/substitutability with surface-water; and, given the paucity of empirical data on groundwater markets, price elasticity of groundwater demand is rarely estimated in the literature. We analysed 10 years of monthly surface and groundwater temporary market data (July 2008–April 2018) within the Murrumbidgee catchment of the Murray-Darling Basin, Australia, to explore a) the lead-lag relationship between surface and groundwater temporary markets; and b) the price elasticity of groundwater market demand. Results illustrate that surface-water markets show price leadership to groundwater temporary markets, and that groundwater demand is price elastic, with a –1.05 price elasticity estimate in our time-period.

Medicine Pricing, Optimal Patent Length and Social Welfare

Social welfare, the ultimate pursuit of medicine patent protection, is affected by multiple market and government factors. This paper constructs a multi-stage dynamic sequential game model involving the government and medicine enterprises and integrates various market and government factors into account. Next, the social welfare of monopoly pricing and government pricing are compared, while the optimal length and its correlations with the influencing factors are determined for medicine patent. It is concluded that the optimization of medicine patent length is a complex decision-making process; the optimal patent length is affected by pricing mode, government subsidy, market demand elasticity, R&D investment, marginal cost, product lifecycle and discount rate. The government should determine medicine patent length according to local conditions, rationalize medicine pricing mechanism, and develop a competitive medicine market.

Trade-Induced Job Turnover and Unemployment: The Role of Variable Demand Elasticity

This paper develops an open economy dynamic general equilibrium model to quantify a new mechanism that substantially magnifies trade-induced changes in labor market outcomes. The model features matching frictions in the labor market and variable demand elasticities in product markets. Because openness increases demand elasticities in product markets, it makes firms' employment decisions more responsive to their idiosyncratic shocks. This in turn raises aggregate job turnover, unemployment, and residual wage inequality in steady state. Fitted to Colombian plant-level data, my model explains the rise in these labor market variables that accompanied Colombia's trade liberalization, while a restricted version of the model that imposes constant demand elasticities fails to do so.

The pricing behavior comparison of Canada and Australia exporter in wheat international market using Pricing to Market (PTM) and Residual Demand Elasticity (RDE)

This paper try to identify and examined the degree of market power on wheat international market by 2 major exporting countries comprising Canada and Australia by using the Pricing to Market (PTM) method and Residual Demand Elasticity (RDE) method. The PTM method found that Canada impose noncompetitive strategy by applying price discrimination and apply market power to their importing. Different results come from Australian exporter as they are not using their market power to the importing. Conflicting result arise from estimation using RDE and PTM method suggest that the need to extend the theoretical model of both model by expand its economic and econometric model to have consistent expected result theoretically and empirically.

Optimal completeness of property rights on renewable resources in the presence of market power

There are many instances where property rights are imperfectly defined, incomplete, or imperfectly enforced. The purpose of this normative paper is to address the following question: are there conditions under which partial property rights are economically efficient in a renewable resource economy? To address this question, we treat the level of completeness of property rights as a continuous variable in a renewable resource economy. By design, property rights restrict access to the resource, so they may allow a limited number of firms to exercise market power. We show that there exists a level of property rights completeness that leads to first-best resource exploitation; this level is different from either absent or complete property rights. Complete rights are neither necessary nor sufficient for efficiency in the presence of market power. We derive an analytic expression for the optimal level of property rights completeness and discuss its policy relevance and information requirements. The optimal level depends on (i) the number of firms, (ii) the elasticity of input productivity, and (iii) the price elasticity of market demand. We also find that a greater difference between the respective values of input and output requires stronger property rights. In fact, high profits imply both a severe potential commons problem and may be the expression of market power; strong property rights limit the commons problem; and their incompleteness offsets market power. Biology also impacts the optimal quality of property rights: when the stock of a resource is more sensitive to harvesting efforts, optimal property rights need to be more complete.

Income inequality and price elasticity of market demand: the case of crossing Lorenz curves

This paper extends Ibragimov and Ibragimov (Econ Theory 32:579–587, 2007) in which the effect of changes income inequality on the price elasticity of market demand is characterized for the class of income distribution changes occurring through non-intersecting Lorenz curve shifts. We derive sufficient conditions for increase/decrease in price elasticity of market demand, under general changes in income distribution, allowing Lorenz curves to intersect as they shift. We conclude by drawing out implications of different types of tax policy changes for demand elasticity.

Income Distribution in Network Markets

We enquiry about the effects of first and second order stochastic dominance shifts of the distribution of the consumers’ willingness to pay, within the standard model of a market with network externalities and hump-shaped demand curve. This issue is analyzed in the polar cases of perfect competition and monopoly. We find that, while under perfect competition both types of distributional changes result in higher output, provided marginal costs are low enough, in the monopoly case the final outcome depends on the way income distribution and the network externality interact in determining market demand elasticity.

Financial engineering in pricing agricultural derivatives based on demand and volatility

Purpose – The purpose of this paper is twofold. First, the author proposes a financial engineering framework to model commodity prices based on market demand processes and demand functions. This framework explains the relation between demand, volatility and the leverage effect of commodities. It is also shown how the proposed framework can be used to price derivatives on commodity prices. Second, the author estimates the model parameters for agricultural commodities and discuss the implications of the results on derivative prices. In particular, the author see how leverage effect (or inverse leverage effect) is related to market demand. Design/methodology/approach – This paper uses a power demand function along with the Cox, Ingersoll and Ross mean-reverting process to find the price process of commodities. Then by using the Ito theorem the constant elastic volatility (CEV) model is derived for the market prices. The partial differential equation that the dynamics of derivative prices satisfy is found and, by the Feynman-Kac theorem, the market derivative prices are provided within a Monte-Carlo simulation framework. Finally, by using a maximum likelihood estimator, the parameters of the CEV model for the agricultural commodity prices are found. Findings – The results of this paper show that derivative prices on commodities are heavily affected by the elasticity of volatility and, consequently, by market demand elasticity. The empirical results show that different groups of agricultural commodities have different values of demand and volatility elasticity. Practical implications – The results of this paper can be used by practitioners to price derivatives on commodity prices and by insurance companies to better price insurance contracts. As in many countries agricultural insurances are subsidised by the government, the results of this paper are useful for setting more efficient policies. Originality/value – Approaches that use the methodology of financial engineering to model agricultural prices and compute the derivative prices are rather new within the literature and still need to be developed for further applications.

Can Health Spending Be Reined in Through Supply Constraints? An Evaluation of Certificate-of-Need Laws

For 50 years, US policymakers and economists have searched for ways to slow the growth of spending on health care. One approach currently taken by 35 states is to restrict the supply of health care by requiringnew and growing providers to show that they serve an “economic need.” Hospitals and certain other health providers must obtain a certificate of need (CON) from a state board before opening or expanding. I show that in a simple model where CON restricts supply, the effect of CON on spending depends on the price elasticity of market demand for health care. CON will work to restrain spending when demand is elastic; however, most estimates show the demand for health care to be quite inelastic. I therefore predict that CON willincrease prices for health care without much reducing its use, leading to an increase in spending. Using data from the National Health Expenditure Accounts, I estimate that CON laws do not reduce spending by any major payer or for any major type of provider and that they increase spending on some types of health care.

Measuring the Housing Market Demand Elasticity in China—Based on the Rational Price Expectation and the Provincial Panel Data

By using panel data of 31 provinces or cities during 1998-2012 in China, this paper measured the housing market demand elasticity. Different from the previous related research, we considered the impact of housing price expectations on housing demand and distinguished between the housing consumption demand price elasticity and investment demand price elasticity. The results showed that there were differences in different regions on housing market demand elasticity such as price elasticity of housing consumption demand, price elasticity of housing investment demand and housing demand income elasticity, etc. The results could provide useful suggestions on regulating the real estate by the Chinese government.