Market Equilibrium Research Articles

Tseng-type splitting projection algorithms for equilibrium problems in Hilbert spaces

In this work, based on the subgradient-type projection method considered by Santos and Scheimberg (Optimization, 2017), we propose some Tseng-type splitting algorithms for solving equilibrium problems whose bifunction is decomposed into the sum of two bifunctions in Hilbert spaces. We establish the weak and strong convergence of the proposed algorithm under standard assumptions. Numerical results in Nash–Cournot oligopolistic electricity market equilibrium model and comparisons with other related methods demonstrate the effectiveness of the proposed algorithm.

Empirical analysis of the market structure of the Hungarian bank market

AbstractThis paper analyzes the market structure of the Hungarian bank market and the effects of the financial crisis of 2008 on it. With a static and a dynamic panel model we estimate the elasticity of total revenues with respect to changes in input prices so that we can determine the market structure based on the Panzar and Rosse methodology for the period between 2003 and 2020. We test the input price elasticity according to the balance sheet and profit and loss data of the top 13 companies. The results show that the Hungarian bank market was a monopolistic competition or a monopoly market in long run equilibrium. To see the effects of the financial crisis we use three subsamples, furthermore we estimate and test the H-statistic with a fixed effect model. During the examined period the level of factor price elasticity increased in time.

Electricity market equilibria analysis on the value of demand-side flexibility portfolios’ mix and the strategic demand aggregators’ market power

Electricity market equilibrium analysis is becoming increasingly important within the today’s liberalized electricity market and regulatory context for both market participants and policy makers. The former ones want to make informed business decisions to optimize their market position, while the latter need to promote efficient equilibria that satisfy both supply and demand-side requirements and optimize social welfare. In this paper, we focus on modeling the strategic demand aggregators’ (DA) behavior via an Equilibrium Problem with Equilibrium Constraints (EPEC) formulation. We model typical demand flexibility portfolios that comprise of several types of distributed flexibility assets and renewable energy resources. We then quantify the value of demand flexibility portfolios’ mix and respective value of market power that a strategic DA may exercise with respect to each DA’s cost decrease and social welfare as a function of time for a day-ahead market use case. Simulation results show that: (i) there is an optimal equilibrium point where overall DAs’ costs decrease, while social welfare’s deteriorates negligibly, (ii) there may be a trade-off between the rate of a certain DA’s cost decrease and the rate of market power (or else % share of total demand flexibility) that this DA possesses, so the strategic DA should take this into account in order to find its optimal CAPEX/OPEX balance for its portfolio, (iii) competition among strategic DAs at the demand-side can mitigate grid congestion problems and serve as a counter-balance to the strategic behavior of the supply-side market participants.

On-Demand, Long-Term, or Hybrid? An Economic Analysis of Optimal Rental Models on Sharing Platforms

This study examines three rental models—long-term, on-demand, and hybrid—in the sharing economy and evaluates their impacts on social welfare and consumer surplus. Our analysis reveals the significance of consumers’ setup and transaction costs in determining the optimal rental-model for platforms. We find that the relative setup cost and the relative transaction cost between owners and renters play a crucial role in shaping the equilibrium market price and optimality of the three rental models, whereas the total costs determine the equilibrium transaction volume and sustainability of the three models, with high costs posing barriers to the viability of on-demand and hybrid models. In practice, platforms can maximize consumer surplus by selecting an optimal rental model that narrows the gap in setup costs between renters and owners. Policymakers should implement favorable policies or subsidies to balance consumers’ participation incentives on both sides of the market, leading to mutually beneficial social outcomes.

A model of electricity market equilibrium with storages

A model of electricity market equilibrium with storages

Is There Enough Housing Production? It Matters Which Indicators Are Used to Answer

McClure and Schwartz argue that there is no US housing shortage for the 2000-2020 period because: (1) we added more dwellings than households; (2) vacancy rates are not low by historical standards; and (3) current headship rates are unrelated to the ratio of recent growth in dwellings to growth in households. I argue that these indicators offer misleading guides for addressing policy-relevant questions related to the supply of housing because household formation is endogenous to changes in the housing stock. I demonstrate the shortcomings of these indicators with a stylized graphic/numerical analysis of short-term and long-term housing market equilibrium and adjustment dynamics in two hypothetical metropolitan areas. Changes in household size (adjusted for demographic and income distributional alterations) and changes in housing rents and prices are more appropriate indicators for making housing policy choices, implying that current concerns over the responsiveness (long-run elasticity) of housing supply are indeed justified.

Vision of Offshore Energy Hub at Faroe Islands: The Market Equilibrium Impact

This study examines the integration of an offshore wind farm and green hydrogen production as a strategy to enhance the Faroe Islands' energy independence and reduce its carbon footprint. Utilizing the EnergyPLAN tool and market economic simulations, including Levelized Cost of Hydrogen and Net Present Value calculations, the research evaluates the economic viability and environmental impact of transitioning to renewable energy sources by 2030. The analysis explores various scenarios, ranging from dedicated offshore wind for in-turbine hydrogen production to platform-based electricity and hydrogen distribution. Results indicate that integrating offshore wind with green hydrogen production can significantly reduce CO2 emissions and dependency on imported fossil fuels. However, financial viability hinges on supportive mechanisms such as investment subsidies. The study's findings suggest that achieving economic feasibility requires strategic policy frameworks. This research contributes to the discourse on sustainable energy planning by offering insights into the dynamics of system integration, market economic simulations, and the role of support mechanisms in facilitating the green transition.

Long-term equilibrium in electricity markets with renewables and energy storage only

AbstractIn this paper, we study the optimal generation mix in power systems where only two technologies are available: variable renewable energy (VRE) and electric energy storage (EES). By using a net load duration curve approach, we formulate a least-cost optimization model in which EES is only limited by its power capacity. We solve this problem analytically and find least-cost and market equilibrium conditions that lead to the optimal capacities of VRE and EES. We show that, mathematically, an electricity price structure that depends on the period of the year (i.e. EES charging or discharging, VRE curtailment, load shedding) and on investments costs leads to cost recovery for VRE and EES. We show that when EES is the marginal technology (either charging or discharging) the price must be non-zero. More specifically, the equilibrium prices during EES charge or discharge are functions of the EES and VRE fixed costs. We confirm our analytical findings using a numerical model. We argue that, although the system we study is hypothetical and simplified, our findings provide insights and research directions for how to recover fixed costs in a future electricity market based on VRE and EES only.

Баланс интересов внешних и внутренних бенефициаров в условиях «неполных контрактов» ресурсной экономики

This article examines the uncertainties arising from agent interactions in interregional resource-intensive markets, particularly those prevalent in northern regions, and explores factors undermining their effectiveness Given these circumstances, the study aims to establish an optimal balance of interests between external and internal beneficiaries by taking into account interests, as well as reducing transaction uncertainty by considering their interests and mitigating transaction uncertainty through the optimization of market regulators in the context of interregional resource-intensive markets typical of northern regions. The analysis reveals that the condition of a single market equilibrium is compromised due to the influence of exogenous factors and the endogenous formation of institutional mechanisms that coordinate agent actions amid uncertain collaborations. Contrary to the neoclassical approach, which focuses on competitive pricing without altering the market structure, an alternative perspective posits that spatial externalities induce endogenous mechanisms characteristic of Chamberlin-type market structures. The study expands the understanding of uncertainty causes within the theory of incomplete contracts, incorporating social system costs into transaction costs in line with the neo-institutional concept. This conceptual framework enables the exploration of spatial entities as meso-economic systems, with a specific emphasis on the organizational and geographical characteristics of northern territories. The research evaluates four institutional zones governing economic management practices in northern regions. Through competence enhancement and optimization of market regulator design, the study demonstrates the feasibility of achieving a balance of interests between external and internal beneficiaries by strengthening institutional capital, thereby reducing social system costs. The proposed system of organizational and institutional measures enhances local institutional practices within the existing institutional matrix without violating antimonopoly legislation, as its focus is on restoring competitive conditions and reducing the costs of operating the social system.

Ways to achieve a balance in the global oil market under sanctions restrictions

Subject. The article considers the oil market functioning under sanctions restrictions. Objectives. The aims are to determine indicators characterizing the ability of the oil market to resist the sanctions, develop tools to study the impact of sanctions on the stability of the energy market, analyze economic consequences of the embargo on the purchase of oil from some producers, perform an economic analysis of possibilities of achieving equilibrium market conditions under an oil embargo. Methods. The main research tool is mathematical modeling of the market. The methodology rests on the study of changes in the typification of the market, caused by the introduction of sanctions restrictions into its regulatory system. This enables to build a game-theoretic model of the market, suitable for its research in the current state. Results. I determined the main indicators characterizing the global oil market functioning under sanctions, constructed a game-theoretic model, examined the market and determined its critical parameters during the introduction of the embargo on the purchase of oil from some producers. The paper defines ways to stabilize the market under the embargo. Conclusions. The model is suitable for studying the current state of the global oil market. Under the current conditions, attempts by consumer countries to circumvent their own sanctions are possible to stabilize the market, which lead to the introduction of secondary sanctions and an increase in market volatility. It is also feasible to enter into contracts between individual large oil producers and consumers at preferential prices. The study of non-market methods of market regulation, specific to the current market situation, is possible by including consumer countries in the model’s set of players.

A Dynamic Marketplace for Distributing Anesthesia Call: A Quality Improvement Initiative.

Anesthesiologists have a significant responsibility to provide care at all hours of the day, including nights, weekends, and holidays. This call burden carries a significant lifestyle constraint that can impact relationships, affect provider wellbeing, and has been associated with provider burnout. This quality improvement study analyzes the effects of a dynamic call marketplace, which allows anesthesiologists to specify how much call they would like to take across a spectrum of hypothetical compensation levels, from very low to very high. The system then determines the market equilibrium price such that every anesthesiologist gets exactly the amount of desired call. A retrospective analysis compared percentage participation in adjusting call burden both pre- and post-implementation of a dynamic marketplace during the years of 2017 to 2023. Additionally, a 2023 post-implementation survey was sent out assessing various aspects of anesthesiologist perception of the new system including work-life balance and job satisfaction. The dynamic call marketplace in this study enabled a more effective platform for adjusting call levels, as there was a statistically significant increase in the percentage of anesthesiologists participating in call exchanged during post- compared to pre-implementation (p < 0.0001). The satisfaction survey suggested agreement among anesthesiologists that the dynamic call marketplace positively affected professional satisfaction and work-life balance. Further, the level of agreement with these statements was most prevalent among middle career stage anesthesiologists (11-20 years as attending physician). The present system may target elements with the capacity to increase satisfaction, particularly among physicians most at risk of burnout within the anesthesia workforce.

Research on Renewable Energy Trading Strategies Based on Evolutionary Game Theory

The authors construct a tripartite evolutionary game model that considers renewable energy, traditional coal-fired power plants, and market users. We propose multiple income matrices under different strategies, conduct evolutionary stability analysis, and form a series of assumptions that meet the stability of the game. We also simulate and analyze the impact of key factors—such as assessment costs, different pricing behaviors of coal-fired power plants, electricity prices of renewable energy, and green electricity demand—on the stability of the game. In addition, the market equilibrium points that can be achieved by optimizing trading strategies and their optimization status in promoting renewable energy consumption are analyzed. Based on the operational characteristics of the Guangxi electricity market in China and the trading situation of renewable energy, an evolutionary game method is applied to conduct empirical research. The trading behavior and evolution of all parties in the market are fully analyzed and are then applied to the construction and mechanism improvement of the electricity market.

Market equilibrium with strategic pricing and strategic constraints in renewable energy: the role of private energy storage

With the increasing prevalence of renewable energy (RE) companies equipped with private energy storage (ES) systems, a dual capability emerges to offer strategic pricing and strategic constraints in market competition. Specifically, these RE companies can strategically leverage their own private ESs to modulate the variability of RE output limits and introduce modified constraints within the market. To examine these new strategic behaviors and the resulting market equilibria, we introduce an innovative bilevel strategic behavior model. The upper level of the model delineates the strategy for RE profit maximization through the imposition of strategic constraints and pricing schemes, while the lower level calculates the revenue outcomes for all entities in the day-ahead energy market clearing. The integration of the bilevel models from all strategic entities leads to the formulation of a new equilibrium problem with equilibrium constraints (EPEC), the solution of which indicates a novel market equilibrium. The impacts of these market equilibria on critical system operation metrics are then evaluated across two representative market mechanisms. Our numerical experiments reveal that RE exhibits low sensitivity to the private ES’s cost, suggesting that the behavior of imposing strategic constraints may be widespread among RE companies owning private ESs. Furthermore, the introduction of strategic constraints enhances the competitiveness of RE, significantly affecting social welfare, energy pricing, and RE integration rate. The study concludes with insights that could inform practical market transactions and system operations.

Spill-over effect of India cotton trade on labour and household income

India is one of the world’s largest producers and exporters of cotton, the major raw material for the textile industry, employing more than 4.5 crore people in the country. The present study aimed to analyse the impact of adverse trade in Indian cotton sector on labor and household income by employing Social Analysis Matrix based multiplier model and partial equilibrium model. Indian textile sector has strong backward linkages with primary input multiplier and household income multiplier of 4.13 and 3.44, respectively and, thus transmitting external impacts to the labour and household income. The sector has a higher multiplier effect of 10.17 on production activities, of which the impact on the cotton sector is 0.126. Fall in export and domestic demand for clothing and apparel in addition to movement restrictions around the world during the period 2020-2021, disrupted cotton supply chain and consequent fall in demand and price of the commodity. Simulations for the increase in carry-over stock and reduction in domestic consumption and cotton exports revealed that limiting the commodity's production and supply would retain the market equilibrium and increase the domestic price to the advantage of the farmers. The study reveals that dynamics in the Indian cotton sector trade significantly impacted labour and household income. Appropriate planning for areas under cotton cultivation and alternate procurement mechanisms during emergency situations would stabilise the Indian cotton economy.   

Notes on random optimal control equilibrium problem via stochastic inverse variational inequalities

The main objective of the paper is to analyze how policymakers influence the random oligopolistic market equilibrium problem. To this purpose, random optimal control equilibrium conditions are introduced. Since the random optimal regulatory tax is characterized by a stochastic inverse variational inequality, existence and well-posedness results on such an inequality are proved. At last a numerical example is discussed.

The legal incidence of ad valorem taxes matters

AbstractIt is well known that, for a specific tax, its economic incidence does not depend on which side of the market has the legal obligation to pay the tax. In this paper, we show that, for an ad valorem tax, this legal incidence does matter for the economic incidence. In particular, when a government imposes an ad valorem tax rate on the sale of a commodity, the resulting reduction in the market equilibrium level of sales will be larger when sellers are obliged to pay the tax than when buyers are obliged to pay the tax.

Market Equilibrium and the Cost of Capital with Heterogeneous Investment Horizons

Expected returns, variances, betas, and alphas are all non-linear functions of the investment horizon. This seems to be a fatal conceptual problem for the capital asset pricing model (CAPM), which assumes a unique common horizon for all investors. We show that under the standard assumptions, the theoretical CAPM equilibrium surprisingly holds with the 1-period parameters, even when investors have heterogeneous and possibly much longer horizons. This is true not only for risk-averse investors, but for any investors with non-decreasing preferences, including prospect theory investors. Thus, the widespread practice of using monthly betas to estimate the cost of capital is theoretically justified.

한국과 미국의 대표 경제 학술지에 대한 토픽분석

American Economic Review in the United States and the Korean Journal of Economic Studies in Korea are both leading academic journals representing their respective countries in the field of economics. Founded in 1911 by the American Economic Association, American Economic Review, the monthly published journal is renowned as the most prestigious journal in the field of economics. On the other hand, the Korean Journal of Economic Studies, initiated by the Korean Economic Association in 1953, holds the longest tradition and authority in the field of economics in South Korea. In this study, we analyzed recent economic trends by examining abstracts published in the past three years, using these two countries' representative economic journals. The analysis involved web scraping 53 Korean abstracts (the Korean Journal of Economic Studies) and 320 English abstracts (American Economic Review) from 2021 to 2023, acquired from the online journal websites of both countries. To facilitate the interpretation of topic analysis, we applied selected topic-specific association rules to derive more refined insights. The results of the analysis revealed that the Korean journal encompasses seven topics, whereas the American journal covers five topics. The interpretation of these topics indicated that household income and regional economic themes are prevalent in the Korean Journal of Economic Studies, while topics related to the labor market and general equilibrium models are prominent in the American Economic Review.

Organization of production and income inequality

AbstractThis paper contributes to the literature that postulates a relationship between income inequality and the relative importance of “market” and “organization” in the direction of resources. The paper emphasizes that both are endogenous; therefore, the empirical associations observed in the empirical data between inequality measures and production organization variables cannot be interpreted as indicative of causal relationships. The paper solves for the composition and size of occupational groups, the distribution of firm size, and the distribution of income as market equilibrium outcomes of an occupational choice economy, and performs a comparative static analysis. We find that the interaction between cross‐economy differences in the distribution of general skills in the labor force and the loss of control in the supervision of workers by managers can explain the empirical regularities observed in the relationship between the organization of production (distribution of firm size) and income inequality (distribution of labor income). This explanation of the empirical regularities differs from others proposed in the literature, such as those based on institutional constraints or the market power of firms.

Short-term impact of climate change on labor market in China: Quantitative spatial analysis based on an oligopsony model

Assessing the impact of climate change on the economy is an important issue for designing climate policy. By constructing an oligopsony model to depict the incompleteness of the labor market and using the quantitative spatial model analysis method, we quantitatively estimated the short-term impact of climate change on the labor market in China. Then, to control climate change, the optimal climate change governance intensities (CCGI) of multi-governments satisfying CD preferences and Stackelberg game are designed and solved. The results show that climate change leads to a decrease in wages and labor supply in labor market equilibrium and a loss of market aggregate income and labor scale. Climate change has led to a shift in labor from the agricultural and dirty sectors to the clean sector. The regional labor distribution is also being “disrupted” due to climate change. Moreover, declining migration costs and increased subsidies help to reduce the negative impacts of climate change. The optimal CCGI of the central government is higher than that of the provincial government. The optimal CCGI is higher in the eastern provinces than in the central and western regions. Implementing CCGI would mitigate the negative climate change shocks to the labor market in China and increase welfare. The conclusions of this paper provide strong support for preventing climate change risks and actively participating in global climate change governance.