Market Equilibrium Research Articles

Empirical analysis of the market structure of the Hungarian bank market

This 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.

Taxing Firearms Like Alcohol or Tobacco

Abstract Despite recent calls for increased taxation of firearms, there has been little quantification of the impact that this would have on the market. Using tax receipts and recent estimates of supply and demand elasticities, this paper measures the size of the U.S. gun market at equilibrium, and the effects of current and higher tax rates. Baseline estimates indicate that market equilibrium is $14.11 billion and current taxes reduce sales by 14.5 percent. Taxing firearms at rates comparable to taxes on alcohol would cut sales to roughly three-quarters of equilibrium and increase tax revenue by 58 percent; raising gun taxes to the rate on tobacco would reduce sales to about half of the equilibrium level and double federal tax revenue.

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.

Pedagogical potential of competence tasks as a means of developing critical thinking of future economists

Purpose. The purpose of the article is to present the means of training future economists for analytical professional activity, which contributes to the development of critical thinking of specialists in economic specialties. Results. The article is devoted to one of the urgent problems of training future bachelors in economics: developing critical thinking in the professional training of economists. We prove that competency-based tasks of economic content are an essential means of developing the critical thinking of future economics specialists. The main competence tasks with economic content include problems with labor productivity, cost, elasticity, rent, interest, compound interest, profitability, market equilibrium, profit, income taxes, credit, optimal decision-making, etc. The competence tasks bind economic concepts with their quantitative and qualitative characteristics and connections. These tasks reflect real economic situations, and solving them contributes to the familiarisation of students with economic concepts and cause-and-effect relationships between them (at the level of representation, assimilation, or consolidation), mathematical models in the economy, development of skills to build and research mathematical models of economic situations, apply mathematical methods and regularities in specific production processes. Scientific novelty. The theory and practice of training economists, which uses competence tasks of economic content as a leading means of developing their critical thinking, has gained further development. The results of the survey of teachers and students confirmed the feasibility of the proposed approach to the use of competence tasks with economic content for the development of critical thinking of future economists. Practical value. Solving competence tasks contributes to developing students’ critical thinking, as it illustrates the process of applying knowledge, skills, and abilities to solving any problems that arise in practice (formalisation, solving a problem within a built model, interpretation). It is advisable to offer such tasks in studying specialised economic disciplines and the first courses in studying “Higher Mathematics”.

정부 재정지출이 자급률에 미치는 영향 분석

In Korea, the food self-sufficiency rate is one of the most important political issue. The Korean government puts a large budget into increasing the food self-sufficiency rate every year but the performance of the government's efforts is still controversial. The purpose of this study is to analyze the impact of government fiscal expenditure on the self-sufficiency rate. In this paper, market changes were measured using Equilibrium Displacement Model(EDM). The changes in the self-sufficiency rate and social welfare were also measured using changes in market equilibrium. As a result of the analyses, as government fiscal expenditure increased, the food self-sufficiency rate and social welfare increased, contributing to food security in Korea. Among government fiscal expenditures, increasing proportion of government fiscal expenditure on consumption showed a more positive effect on all markets than increasing proportion of government fiscal expenditure on other types. Therefore, it is necessary to expand policies to increase domestic consumption. The results of this study can be useful to discuss about the more efficient management of government fiscal expenditure for the agricultural sector.

ОСОБЛИВОСТІ ФУНКЦІОНУВАННЯ ВАЛЮТНОГО РИНКУ УКРАЇНИ В УМОВАХ ЕКОНОМІЧНОЇ НЕВИЗНАЧЕНОСТІ

In the era of globalization and the advancement of information technology, Ukraine’s foreign exchange market encounters economic uncertainty, particularly amid efforts to overcome the repercussions of the COVID-19 pandemic and the challenges posed by a full-scale armed invasion by Russia. This situation introduces a range of short-term and long-term obstacles, notably disrupting established trade routes and supply chains, impacting the balance of imports and exports, and placing significant strain on the foreign exchange market among other areas. This article aims to analyze the current peculiarities of the domestic foreign exchange market’s operation amidst economic uncertainty, focusing on the impact of governmental and regulatory actions on its dynamics, especially throughout 2022-2023. It delves into the regulatory measures enacted to stabilize the foreign exchange market under martial law conditions. The National Bank of Ukraine (NBU) has implemented several countermeasures in response to these challenges, including covering 37% of the currency supply, which resulted in a reduction in daily transactions and an enhanced role in market equilibrium. The measures also include restrictions on capital transactions and the facilitation of international assistance to satisfy foreign exchange demands. The future outlook of the foreign exchange market is contingent upon economic recuperation, foreign investments, macroeconomic policies, geopolitical risks, and regulatory frameworks. The significance of domestic reforms and international support is underscored as pivotal. It is also noted that global economic tendencies will influence Ukraine’s foreign exchange market in the aftermath of the conflict. This study is aimed at providing insights for professional analysts of the foreign exchange market, governmental bodies, and international financial institutions. Future investigations will explore the implications of the NBU’s policies on the foreign exchange market and their potential to foster economic recovery in Ukraine amidst prevailing challenges and threats.

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

It 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.