Market Equilibrium Analysis Research Articles

Coupling the Tradeoff Analysis Model with a market equilibrium model to analyze economic and environmental outcomes of agricultural production systems

Analysis of the economic and environmental outcomes of agricultural systems requires a bottom-up linkage from the farm to market, as well as a top-down linkage from market to farm. This study develops this two-way linkage between the Tradeoff Analysis Model of agricultural systems and a partial equilibrium market model. The resulting model can determine the effects of technology and policy interventions on the spatial distribution of environmental and economic outcomes at market equilibrium quantities and prices. The approach is demonstrated with a case study of tradeoffs between poverty and nutrient depletion in a semi-subsistence agricultural system (Machakos, Kenya). The results suggest that the linkage of market equilibrium analysis to farm level Integrated Assessment Models can be important in the analysis of agriculture–environment interactions.

Revisiting the Hedonic Price Method to Assess the Implicit Price of Environmental Quality with Market Segmentation

The article highlights the role of heterogeneity in the formation of hedonic prices. The article distinguishes between continuous and groupwise heterogeneity. The distinction helps understanding two important points. First, the analysis of market equilibrium with groupwise heterogeneity makes explicit the role of participation and incentives compatibility constraints for groups of buyers. The case of continuous heterogeneity may be thought of as a limit case of groupwise heterogeneity when the number of groups goes to infinity and their masses go to zero. The hedonic price curve is then obtained as the solution of a differential equation resulting from a market clearing condition. Second, the article outlines that submarkets emerge from market equilibrium only in the case of groupwise heterogeneity. The existence of submarkets means that the hedonic price function is continuous but the implicit price of characteristics is discontinuous at endogenous threshold values separating submarkets. Major implications for the valuation of environmental quality follow on. Based on numerical simulations, the article gives some insights into the way significant biases and drawbacks in the estimation of the implicit price of environmental quality can arise if the usual two steps procedure is implemented.

Market Equilibrium Vs. Market Imbalance

This paper proposes a basic graphical and mathematical multidimensional approach to study the market behavior. Our basic assumption is that demand and supply is affected by a large amount of variables without any restriction or isolation among them such as the case of the Ceteris Paribus assumption applies into the market equilibrium analysis. Hence, all these variables that affect demand and supply always keeps in a dynamic imbalance state, it is mean that demand and supply can be affected by different internalities and externalities from economic forces, social forces, political forces, technological forces, environment forces, institutional forces and different economic agents (e.g. public sector -government-, private sector -firms-, consumers) behavior. Therefore, the study of the market behavior request alternative economic assumptions and economic models that available to explain closely the real world.

General Workplace-Equilibrium Theory

General workplace-equilibrium theory provides a nonspecific solution to a model of employee-employer rational choice in the circumstance of technological heterogeneities. It shares a critical characteristic with the ubiquitous friction-augmented, dynamic stochastic general market equilibrium analysis. In both, the time-paths of total output and employment, through recession, recovery, and expansion, are consistent with continuous equilibrium. The nature of the equilibrium, however, differs. The intra-firm class results from generalized rest points in the spaces of large- and small-workplace decision rules, while the DSGME class represents generalized rest points in the space of multi-market decision rules. The difference between the two classes implies that workplace equilibrium is better suited to the task of microfounding macroeconomics that features wage rigidities and involuntary job loss than is market equilibrium, which inherently requires meaningful labor-price flexibility. The workplace approach pre-serves Pareto optimality while tractably modeling markets in chronic disequilibrium, a giant step toward a policy-useful formal macroeconomics. Most fundamentally, general workplace equilibrium provides the deep structure that allows the effective integration of the division of labor, sunk capital, wage rigidities, involuntary job loss, and well-motivated employees into optimizing, continuous-equilibrium theory, permitting a powerful, long overdue, synthesis of classical, neoclassical, and Keynesian analyses.

Capital Asset Pricing Model with Generalized Elliptical Distribution

Abstract The distributions of returns on risky assets have an important effect on their equilibrium prices, and their empirical distributions have non-normal characteristics such as skewness and excess kurtosis, so assumption of normal distribution is not reasonable in capital asset pricing model (CAPM). Generalized elliptical distribution can well describe the empirically distributional characteristics of risky asset returns. This article assumes that risky asset returns have generalized elliptical distributions, proves Capital Asset Pricing Model with generalized elliptical distributions using the assumption of securities market economy and equilibrium analysis. As the generalized elliptical distribution can better describe the distributions of risky asset returns than normal distribution, CAPM with generalized elliptical distribution can better describe the behaviors of risky asset prices.

Electricity market equilibrium analysis based on nonlinear interior point algorithm with complementarity constraints

This paper presents an interior point algorithm based on a.c. network model for determining the Nash supply function equilibrium (SFE) of bid-based electricity markets. The SFE problem is considered as a bi-level game. At the first level, the problem begins with the formulation of an optimal power flow (OPF) interior point-based algorithm to handle the independent system operator (ISO) problem for maximising social welfare. This algorithm is based on the OPF with a.c. network transmission model taking into account all the operating aspects such as the generation capacity limits, bus voltage limits, transmission line constraints, network losses and especially the effect of the reactive power. The resulting Karush-Kuhn-Tucker (KKT) conditions of the problem at the first level are then reformulated using nonlinear complementarity constraints and incorporated as equality constraints in the second-level formulation for maximising the individual profit for each strategic generating firm. By employing a special nonlinear complementarity function, the complementarity constraints are then transformed into nonlinear algebraic expressions, thus the KKT conditions of the resulting combined problem can be derived. The final problem is then solved iteratively based on the solution techniques of the interior point algorithm. Numerical examples of a three-bus system, the IEEE 14-bus system and the IEEE 30-bus system, show that the algorithm can successfully determine the electricity market equilibrium with the a.c. network model.

Hedonic price analysis of urban housing: An empirical research on Hangzhou, China

The hedonic price model is widely applied to study the urban housing market because of the heterogeneity of housing products. Literature indicated that the hedonic price theory mainly includes two parts: Lancaster's partiality theory and Rosen's characteristic market equilibrium analysis. This paper chose 18 characteristics as independent variables and set up a linear hedonic price model for Hangzhou City. The model was tested with 2473 housing samples and field survey data of 290 housing commu- nities. This research found that 14 out of 18 characteristics had significant influence on housing price. They were classified into 5 groups according to their impact degree.

Asymptotic methods for asset market equilibrium analysis

General equilibrium analysis is difficult when asset markets are incomplete. We make the simplifying assumption that uncertainty is small and use bifurcation methods to compute Taylor series approximations for asset demand and asset market equilibrium. A computer must be used to derive these approximations since they involve large amounts of algebraic manipulation. We use this method to analyze the allocative and welfare effects of introducing a new security. We find that adding any nontrivial derivative security will raise the price of the risky security relative to the bond when risks are small.

A Market Equilibrium Analysis of the Impact of Risk on the U.S. Rice Industry

An economic model of supply/demand for U.S. rice suggests that increases in risk result in decreased acreage and increased marketing margins. In a market equilibrium context, the empirical results also suggest rice production and rice prices are more responsive to changes in risk faced by marketing firms than changes in risk faced by producing firms.

Debt and taxes: A multiperiod investigation

This paper extends the Miller bond market equilibrium analysis to a multiperiod setting. From the model developed we derive several predictions relating optimal financial leverage to firm characteristics and to the business cycle. The analysis also reveals some interesting determinants of the market value of the tax subsidy associated with corporate debt.

Equilibrium Long-Term Labor Contracts

The paper presents a labor market equilibrium analysis of implicit contract theory. A two-period, single-good model is used to propose consistent notions of labor market equilibrium for long-term employment contracts both when labor is specialized and cannot move in the second period and when there is free mobility without costs. The result that long-term contracts emerge in equilibrium even without mobility costs is novel and contrary to common beliefs. The main features of equilibrium are that (risk-neutral) firms will insure (risk-averse) workers against downside risk, yielding downward rigid wages. Wages are not fully rigid (as in earlier work on contract theory) because workers may quit and wages have to be bid up to retain them. The firm gets its return of the insurance deal by paying less than marginal product in the first period. The resulting equilibrium is second best and lies between productive efficiency and full insurance. Workers gain from long-term contracts in comparison to spot markets; whereas owners may not. In the model with specialized skills there exist transfer payments such that both parties are better off within an equilibrium with long-term contracts.

"Search Market Equilibrium". Reply

Conclusions in a scientific analysis are valid for the set of assumptions given in the analysis. From an analysis with one set of assumptions, it is not possible to infer whether or not another set of assumptions will give the same conclusions. Roy Webb correctly points out that one of the assumptions in my analysis of search market equilibrium in the article in question is that each consumer buys only once, leaves the market and is replaced by another, new consumer. Moreover, Webb argues that my conclusions might not be the same if I had made another assumption on this point. This is correct, too. It would, of course, be interesting to see the analysis carried out under such an alternate assumption.

The Accuracy of Forecasts: A Market Equilibrium Analysis

Some features of the theory 86. — Expected profits of the firm, 88. — Optimal accuracy of forecasts, 91. — Market equilibrium, 92. — Comparative statics, 92. — Conclusion, 96.

Risk, Return, and Equilibrium: A General Single-Period Theory of Asset Selection and Capital-Market Equilibrium.

Uncertainty is a major concern in financial decision-making. Financial theory contains a number of conceptual frameworks that treat the effects of uncertainty; yet no one has attempted to put forth a general treatment of portfolio risk. This book fills the theoretical gap by developing a general measure of portfolio risk and formulating a general model of asset selection in the context of market equilibrium. The author seeks to define and elucidate theoretical issues through rigorous, quantitative arguments; and critical evaluation of the basic assumptions of the model.Stone summarizes relevant aspects of the Markowitz theory of portfolio selection and presents a brief overview of the Sharpe, Lintner, and Mossin models in which asset selections are based on two parameters of choice--either mean return and variance, or mean return and standard deviation. He then generalizes these models to objective functions that are still functions of two parameters--expected return (or expected wealth), and a general measure of risk. Stone introduces a new global measure of risk, relating it to existing work in the theory of risk, and presents and compares two alternative risk-return representations of expected utility: the Generalized Markowitz Criterion (GMC) and the Two-Parameter Functional Representation (TPFR). The author provides a general analysis of asset selection and market equilibrium and examines the GMC and TPFR in greater detail. Finally, he investigates existing models of capital market equilibrium formulated by Sharpe, Lintner, and Mossin, and analyzes these models according to the previously developed general model.Mathematical analysis and logical reasoning are the basic methodological tools used in this work. The author has, however, taken care to present proofs and derivations in sufficient detail to make them easy to follow at a graduate level. Students of economics and finance (particularly those in advanced courses dealing with risk, asset selection, or capital markets) and professionals in the field will find the book rich in constructive new theoretical material.