Market Equilibrium Research Articles

Strategic interactions and market equilibrium in China's agricultural catastrophic insurance

Strategic interactions and market equilibrium in China's agricultural catastrophic insurance

Modeling a ride-sourcing market with a third-party platform integrator under batch matching mechanisms

This paper develops a mathematical model to characterize a generalized ride-sourcing market with a third-party integrator and multiple competitive ride-sourcing platforms. Different from earlier works which normally assume instant matching strategies, our model can characterize the integrator’s and platforms’ decisions on choosing flexible matching strategies under batch matching mechanisms and their influences on the market equilibrium. Through theoretical analytics and numerical studies, this study reveals that the introduction of a third-party platform integrator is not always beneficial but may be detrimental to the system in certain situations. For example, an inefficient matching strategy chosen by the integrator may lead to a lose-lose situation where both the customers hailing rides through the integrator or the individual platforms experience longer waiting times. In addition, we show that a ride-sourcing platform with a high market share may refuse to join the integrator since the efficiency gains brought by the integrator do not outweigh the losses caused by its losing market share. The managerial insights obtained from this work can assist both the integrator and individual ride-sourcing platforms in developing more efficient operational strategies in terms of pricing and matching strategies.

On-demand insurance: idea, development, impact on market equilibrium

The article presents the definition, idea, development, and current state of a new business model known as on-demand insurance which has been in existence since the early 21st century. Moreover, the article does not only describe the premises behind the development of this new method of creating value for clients of insurance companies and the opportunities that appear in the market but also addresses the challenges that insurance providers can encounter. Based on the analysis and available source materials, the most interesting types of these insurance products and the entities that include such products in the portfolios were presented. In addition, some new regulatory challenges and trends were described. The purpose of this study is to analyse the behaviour of the insurance market after the introduction of on-demand products in light of the classical definition of equilibrium in a competitive insurance market under conditions of information asymmetry. The authors analysed the economic implications of implementing on-demand insurance, demonstrating its potential to enhance the overall welfare of the insured population by increasing utility for certain risk groups of clients.

Fixed Point Results for Fuzzy Enriched Contraction in Fuzzy Banach Spaces with Applications to Fractals and Dynamic Market Equillibrium

We introduce fuzzy enriched contraction, which extends the classical notion of fuzzy Banach contraction and encompasses specific fuzzy non-expansive mappings. Our investigation establishes both the presence and uniqueness of fixed points considering this broad category of operators using a Krasnoselskij iterative scheme for their approximation. We also show the graphical representation of fuzzy enriched contraction and analyze its graph for different values of beta. The implications of these findings extend to significant results within fuzzy fixed-point theory, enriching the understanding of iterative processes in fuzzy metric spaces. To demonstrate the versatility of our innovative concepts and the associated fixed-point theorems, we provide illustrative examples that showcase their applicability across diverse domains, including the generation of fractals. This demonstrates the relevance of fuzzy enriched contraction to iterated function systems, enabling the study of fractal structures under various contractive conditions. Additionally, we explore practical applications of fuzzy enriched contraction in dynamic market equilibrium, offering new insights into stability and convergence in economic models. Through this unified framework, we open new avenues for both theoretical advancements and real world applications in fuzzy systems.

Insider trading at a random deadline with correlation between dynamic asset and stochastic liquidity

We propose a generalized continuous-time insider trading model, building upon the frameworks of Caldentey and Stacchetti (2010) and Collin-Dufresne and Fos (2016), with a correlation between the value of a risky asset following an Ornstein-Uhlenbeck-type process and the noise trading volume with volatility characterized by a general stochastic process. And a closed form of the market equilibrium is established, consisting of the insider's trading strategy and the market makers' pricing rule. It shows that at the equilibrium: (i) all of the insider's private information is released at the end of the transaction; (ii) market depth and market liquidity evolve as semi-martingales, respectively; and (iii) the equilibrium price is driven by a bridge process that solves an Ornstein-Uhlenbeck-type SDE. Numerical simulations show that as the correlation coefficient increases, the equilibrium price becomes more informative, leading to a decrease in both the trading intensity and the expected payoff for the insider.

Regional Operation of Electricity-Hythane Integrated Energy System Considering Coupled Energy and Carbon Trading

The deepening implementation of the energy and carbon market imposes trading requirements on multiple regional integrated energy system participants, including power generation plants, industrial users, and carbon capture, utilization, and storage (CCUS) facilities. Their diverse roles in different markets strengthen the interconnections among these subsystems. On the other hand, the operation of CCUS, containing carbon capture (CS), power-to-hydrogen (P2H), and power-to-gas (P2G), results in the coupling of regional carbon reduction costs with the operation of electricity and hythane networks. In this paper, we propose a regional economic dispatching model of an integrated energy system. The markets are organized in a centralized form, and their clearing conditions are considered. CCUS is designed to inject hydrogen or natural gas into hythane networks, operating more flexibly. A generalized Nash game is applied to analyze the multiple trading equilibria of different entities. Simulations are carried out to derive a different market equilibrium regarding network scales, seasonal load shifts, and the ownership of CCUS. Simulation results in a 39-bus/20-node coupled network indicate that the regional average carbon prices fluctuate from ¥1078.82 to ¥1519.03, and the organization of independent CCUS is more preferred under the proposed market structure.

Discovering temporal-spatial features of jobs-housing relationship from a regional perspective: A nationwide study

The recent developments in regionalization have redefined the concept of jobs-housing relationship, calling for reexaminations from the regional perspective. This paper studies the temporal and spatial features of jobs-housing relationship and their relations with regional mobility and regional structure in 2258 Quxians (urban districts or rural counties) across China based on 49 months of cellular signaling data. Results show that jobs-housing relationship differ between city types and have seasonal cycles and yearly trends reflecting the rhythm and development of human activity. The temporal variations in jobs-housing relationship are affected by regional mobility, and larger intercity travel volume leads to lower balance level. The spatial variations in jobs-housing relationship are influenced by the form of regional structure, as measured using the Zipf scaling exponent. More polarized regions are less balanced with exceptions in underdeveloped regions. There is an underlying inflection point in jobs-housing relationship that is similar to its long-term average value and reflects regional market equilibrium. This paper contributes to existing literature by providing a big-data driven nationwide jobs-housing study fully aware of the theoretical and practical needs of a regionalizing world. Findings advances our understanding of macroscopic jobs-housing relationship, and offers policy suggestions for governments across the globe.

Wild goose chase or not? Equilibrium in a hybrid ride-hailing market

We consider a hybrid ride-hailing platform, such as Uber, Lyft, and Didi, offering passengers the choice between a ride-sourcing service and a ride-pooling service. A passenger who chooses the ride-sourcing service can enjoy the trip alone, while passengers who pool can benefit from a lower trip fare; however, the latter may take more travel time (i.e., waiting time and in-vehicle time) and may require passengers to share their ride with strangers. When a passenger is matched to a distant driver, the ride-sourcing or ride-pooling service may get stuck in an inefficient wild-goose-chase (WGC) regime, wherein the driver spends a lot of time picking up passengers. To explore the non-WGC regime of ride-sourcing and ride-pooling services in the hybrid ride-hailing market, we build an equilibrium model that maximizes the profit of the platform, obtain the optimal trip fares of the two services, derive the non-WGC conditions for both services, and then compare them to those in the single market. We find that the interaction between the two services not only contributes to demand shifting effect, which adjusts fares and promotes differentiated pricing strategies, but also alters the non-WGC conditions of each service in the hybrid market, deepening their interdependence so that the waiting time of one service has a non-monotonic effect on the non-WGC regime of the alternative service. Moreover, benefiting from the coordinated complementarity of the two services with each other, passenger demand is more evenly distributed, which enhances real capacity and turnover, reduces the waiting time threshold (WTT) for each service to fall into the WGC regime under the mild condition, and contributes to travel efficiency overall. Such advantages of market diversity lay a solid foundation for ride-hailing market platforms to be able to offer more diverse service options.

New opportunities in produced water management: A market-based approach to produced water trading

Produced water (PW) is a byproduct of oil and gas (O&G) production. Obtained alongside the more valuable energy products, PW is usually characterized by high levels of salinity and often contains many contaminants (chemicals, soluble and insoluble oil, organics, etc.) making it unsuitable for release without substantial treatment. Couple this with the fact that PW is typically obtained at multiple times the rate of oil or gas, and the added transport, treatment, and disposal costs become a serious challenge for operators. These realities have led to ad-hoc practices including cooperation between industry competitors to recycle, share, or otherwise mitigate PW costs. The National Energy Technology Laboratory (NETL) in partnership with the Ground Water Protection Council (GWPC) is pursuing novel technology solutions to address PW issues that complement or improve ad-hoc practices adopted by operators. In this paper, we observe that well-established market management practices used in electrical power generation have natural analogues in the PW supply chain. These parallels open up a new line of research where we view PW management as a market equilibrium problem, and explore solutions that foster active and data-based collaboration among operators through market structures similar to power markets, with the ultimate objective of improving PW management costs and recycling rates. We make a case for our observations, present a PW market clearing optimization model that shows how such a market system could operate in the O&G space, and provide an illustrative case study for demonstration.

Contextual drivers of energy demand and supply from renewable sources

This study investigates the socio-economic and environmental drivers shaping renewable energy demand and supply within a meso-level setting (Italian regions, 2004–2020). Employing a panel vector error correction mechanism (PVECM) and an integrative biplot analysis, the research outcomes reveal a market equilibrium between demand and supply in the short and long run. Human capital accumulation is identified as pivotal in driving the renewable energy transition. Significant regional heterogeneities indicate challenges in achieving convergence towards sustainability and socio-economic development and well-being. Key empirical implications include enhancing education and vocational training to strengthen human capital and implementing tailored regional strategies for sustainable infrastructure development. These findings support policymakers in formulating targeted policies for a resilient, balanced energy future and addressing regional disparities in renewable energy adoption.

How the Neoclassical Market Ideology Destroys the Market: Shareholder Value Maximization as a Self-Defeating Prophecy

Abstract According to the widespread, neoclassical market ideology, market prices are not simply helpful, yet imperfect, reference points for consumers and profit-seeking enterprises. Rather, they are interpreted as reflecting the true value of goods. The hypothetical end result of the market process – the market equilibrium – is thereby assumed to be an ever-satisfied condition of the market economy. Based on this unrealistic presupposition, this market ideology maintains that the performance of managers can be evaluated from the prices of the (net) assets they control and, in the case of publicly traded companies, share prices. The share prices supposedly reflect the value that managers create for shareholders and, thus, the economy as a whole. If this were actually the case, the maximization of so-called shareholder value would be a socially beneficial goal for managers. The present paper demonstrates, however, that the ongoing re-orientation of corporate governance towards the maximization of values (as revealed by share prices) instead of profits (as determined by the accounting system) destroys the very market processes that coordinate business activity and allocate resources in the market economy.

(α, F)-Geraghty-type generalized F-contractions on non-Archimedean fuzzy metric-unlike spaces

Abstract In this study, we generalize fuzzy metric-like, non-Archimedean fuzzy metric-like, and all the variants of fuzzy metric spaces. We propose the idea of fuzzy metric-unlike and non-Archimedean fuzzy metric-unlike, respectively. We also propose the idea of ( α , F ) \left(\alpha ,F) -Geraghty-type generalized F F -contraction mappings utilizing fuzzy metric-unlike and non-Archimedean fuzzy metric-unlike spaces. We investigate the presence of unique fixed points using the recently introduced contraction mappings. In order to complement our study, we consider an application to dynamic market equilibrium.

An analysis of optimal equilibrium in the carbon trading market - From a tripartite evolutionary game perspective

As the climate crisis intensifies, achieving the global consensus of carbon peaking and carbon neutrality has become imperative. Carbon trading is an important financial measure to address the environmental crisis, and the realization of the dual‑carbon goals requires the cooperation and joint efforts of all parties involved in the carbon emissions trading market. This study constructs a dynamic evolutionary game model involving enterprises, government, and financial institutions while considering consumers' influence. By solving for equilibrium points and conducting numerical simulations, we explore optimal strategy choices for each stakeholder. Our findings reveal that the success of enterprise low-carbon transition is contingent upon market dynamics and requires active cooperation from government, financial institutions, and the public. Furthermore, factors such as financial market efficiency and internal governance capacity significantly impact enterprises' transformation decisions by influencing low-carbon transition costs. Public feedback indirectly affects enterprise decisions through its influence on financial institutions' provision of green services. Additionally, gradual reduction of carbon quotas by government entities facilitates progress toward low-carbon transformation objectives.

Optimal fiscal policy in small open economies with habit persistence

Abstract This paper sets up a small open economy model with habit persistence in consumption in which distortionary taxation is available in a flexible price environment. In open economy, the habit persistence in consumption aggravates the terms of trade externality, absent in closed economy, calling for more aggressive fiscal policy. While optimal labor income taxes are time-invariant in a closed economy with internal habit, they should be time-varying in an open economy to alleviate the terms of trade externality, even if the intertemporal elasticity of substitution equals the intratemporal elasticity of substitution. In a small open economy composed of households with habit persistence in consumption, households’ decision to gradually adjust their consumption and labor hours intensifies the undesirable terms of trade externality or the terms of trade channel. This generates a time-varying wedge between the efficiency conditions of the Ramsey planner and the market equilibrium conditions, calling for a time-varying taxation which takes into account the intertemporal elasticity of substitution and the intratemporal elasticity of substitution between home and foreign goods, in addition to the degree of habit and goods market distortion. The volatility of optimal tax rate increases with the degree of habit, whether households have external or internal habit. The volatility of tax rate shows an inverted U-shape in the degree of openness in the small open economy with habit. Finally, the optimal labor income tax rate moves countercyclically for low degree of intratemporal elasticity of substitution, while it moves procyclically for high degree of intratemporal elasticity of substitution.

DEVELOPMENT OF THE GLOBAL AIR TRANSPORTATION MARKET IN CONDITIONS OF TURBULENCE

The purpose of the article is to develop and substantiate the strategic priorities of international cooperation of air transport enterprises of Ukraine in war and post-war times based on the study of turbulence factors affecting the activity of the global air transport market, as well as the analysis of the strategic development of the world's largest airlines in crisis conditions. The methodological basis of the research is scientific theories of economic cycles and crises, theories of market equilibrium, theories of market structures, theories of cooperation and integration. Both general scientific and special methods of scientific knowledge were used – historical-logical, descriptive-analytical, analysis and synthesis, methods of quantitative and qualitative comparisons. The informational basis of the article is monographic studies and periodical publications of Ukrainian and foreign economists, analytical reports of international aviation organizations, international consulting companies and analytical centres. The article examines the essence, structure and modern trends in the development of the global air transport market. Turbulence factors affecting the dynamics of air transport are identified and justified, including geopolitical instability, economic downturns, rising fuel prices, pandemics, technological innovations etc. The impact of crises on international air transportation was assessed, and the peculiarities of the regulation of the world air market were considered. The role of global strategic alliances in the formation of the world market of air transportation is determined, it is established that international cooperation of air transport enterprises allows to increase the market share. The results of the research made it possible to justify the strategic priorities of international cooperation of air transport enterprises of Ukraine in war and post-war times. Research results can be used for scientific justification and further creation of proper conditions for the effective functioning of the global air transport market, as well as in the development of new strategies for air transport enterprises of Ukraine, which will allow them to remain stable and competitive in conditions of uncertainty and growing threats.

Predictive crypto-asset automated market maker architecture for decentralized finance using deep reinforcement learning

This study proposes a quote-driven predictive automated market maker (AMM) platform with on-chain custody and settlement functions, alongside off-chain predictive reinforcement learning capabilities, to improve the liquidity provision of real-world AMMs. The proposed architecture augments Uniswap V3, a cryptocurrency AMM protocol, by using a novel market equilibrium pricing to reduce divergence and slippage losses. Furthermore, the proposed architecture involves a predictive AMM capability, for which a deep hybrid long short-term memory (LSTM) and Q-learning reinforcement learning framework is used. It seeks to improve market efficiency through obtaining more accurate forecasts of liquidity concentration ranges, where liquidity starts moving to expected concentration ranges prior to asset price movement; thus, liquidity utilization is improved. The augmented protocol framework is expected to have practical real-world implications through (1) reducing divergence loss for liquidity providers; (2) reducing slippage for crypto-asset traders; and (3) improving capital efficiency for liquidity provision for the AMM protocol. The proposed architecture is empirically benchmarked against the well-established Uniswap V3 AMM architecture. The preliminary findings indicate that the novel AMM framework offers enhanced capital efficiency, reduced divergence loss, and diminished slippage, which could potentially address several of the challenges inherent to AMMs.

Pharmaceutical innovation collaboration, evaluation, and matching

This paper theoretically studies pharmaceutical innovation collaborations, where heterogeneous firms compete for heterogeneous academics. At an interim stage, the firm evaluates the project, which allows it to monitor academics and decide whether to terminate the project to avoid the loss from a future failure. This paper explores the contract, project termination strategy, and collaboration matching. The firm’s innovation strategy (exploitations or explorations) determines the evaluation structure, which may affect the market equilibrium. By considering different innovation strategies, this paper shows that in each case, the equilibrium matching is unique (either positive or negative assortative). Consequently, the chosen innovation strategy plays a pivotal role in shaping equilibrium matching outcomes. These findings provide theoretical insights into pharma-academic alliances, shed light on the observed positive or negative assortative properties in the market, and advocate for the consideration of innovation strategies and evaluation structures in future research endeavors. Moreover, this paper also provides several empirical and policy implications.

Private ownership in monopolistic competition models

Motivated by empirical evidence, I study the properties of a monopolistic competition model with private ownership. Toward that goal, I consider a monopolistic competition model with additive preferences, homogeneous workers and homogeneous firms. I then introduce in such a standard framework a single additional ingredient: private ownership. Private ownership means that each firm is owned and managed by a single household called the entrepreneur, and this entrepreneur receives profits as sole revenues. In turn, private ownership changes the nature of entry. Free entry in the industry is no longer satisfied. Rather, the number of firms is now determined through occupational choice. Armed with this new framework, I provide a full characterization of a market equilibrium, and compare it to the standard model with collective ownership and free entry. Notably, I find new results concerning optimality, the transmission of aggregate shocks and the ability of the new model to replicate well-established empirical facts.

Reinsurance contracts under Stackelberg game and market equilibrium

In this paper, we investigate the robust reinsurance contracts under Stackelberg game and market equilibrium. Each reinsurance contract contains two decision makers, one insurer and one reinsurer. The insurer is ambiguity-neutral and adopts a loss-dependent premium principle to collect premium. The reinsurer is ambiguity-averse and is a Bayesian learner. By using the stochastic dynamic programming method and the inverse method, the analytical expressions of the optimal risk allocation proportion and reinsurance price are derived for the two types of reinsurance contracts. We shows that the loss-dependent premium principle has the penalty-reward nature. Both the reinsurance price and demand decrease as the extrapolative intensity increases. Learning has important significance and always puts down the reinsurance price and puts up the reinsurance demand. On the contrary, the reinsurer’s ambiguity aversion raises the reinsurance price and decreases the reinsurance demand. Finally, numerical analysis reveals that the reinsurance price is greater under the Stackelberg game than that under the market equilibrium.

Synergizing shared micromobility and public transit towards an equitable multimodal transportation network

This paper assesses the equity impacts of shared micromobility and investigates regulatory policies that improve transport equity and promote synergy between public transit and shared micromobility. We consider a multimodal transportation network, where a micromobility platform deploys docking stations and operates a fleet of micromobility vehicles to provide shared micromobility services and a public transit agency offers transit services over a transportation network. A market equilibrium model is developed to capture the intimate interactions among access and egress times of shared micromobility services, waiting times of transit services, the spatial distribution of docking stations, passenger demand, platform pricing and fleet sizing, vehicle repositioning and the micromobility platform profit. The platform decision problem is cast as a high-dimensional non-convex program. A solution method is proposed to efficiently compute the solution through problem reformulation and dimensionality reduction. Based on the proposed framework, we evaluate spatial equity in transport accessibility using the Gini index, and find that although shared micromobility improves overall transport accessibility, the benefits are not fairly distributed across different geographic zones, which leads to enlarged spatial inequity gaps after introducing shared micromobility. To promote transport equity, we investigate three policy directions: (a) to impose a vehicle density floor on shared micromobility; (b) to offer a subsidy on shared micromobility rides for first/last-mile connections; and (c) to promote collaboration between public transit and shared micromobility. We show that different regulatory policies have advantages and limitations. The minimum vehicle density requirement can simultaneously improve spatial equity and passengers’ surplus, but has limited equity improvements. In contrast, the subsidy on bundled services could significantly mitigate spatial inequity, but it hurts passengers and the platform profit. Compared to the other two policies, the transit-micromobility collaboration can lead to higher equity improvement, higher passenger surplus, while offering a guarantee on the platform profit, which turns out to be the most cost-effective approach. These insights are validated through realistic numerical studies for San Francisco.