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Equilibrium price

Sorenson, Alan T. 2000. Equilibrium Price Dispersion in Retail Markets for Prescription Drugs. Journal of Political Economy 108(4) 833-850. [Pg.314]

The meaning of equilibrium in the social sciences is a state in which people s plans are consistent with each other. Usually, but not invariably, this also ensures that unintended consequences will not occur. In Fig. X.2, equilibrium is where the supply and demand curves cross. If hog farmers expect the equilibrium price to obtain next year, they will make decisions (about how much to produce) which cause that price to be realized. [Pg.109]

Net Present Value of the land is simply its going market price. Net present value is determined in part by the opportunity cost of labor, that is, the value of the labor necessary for economic income the cost of defending property rights to that land the opportunity cost of capital, that is, the value of the capital necessary to produce an economic income and the equilibrium price of the land, that is, what bidders in the market place will pay after consideration of other factors. [Pg.160]

I should add that this argument, while valid, needs to be disambiguated in an important respect. The diagram demonstrates the possibility of an inverse relationship between the rate of surplus-value and the equilibrium rate of profit. The capitalists, however, are not motivated by the equilibrium rate, that is the profit that can be made at the new equilibrium prices, but by the profit that can be made with the new technique at the... [Pg.145]

Yet observe that one consequerKe of admitting both labour and land as scarce resources is to take the bottom out of the labour theory of value. With two or more scarce factors the equilibrium prices are not independent of final demand (3.2.2). Hence there is a conflict between Marx s theory of value and his theory of da.s.ses, in that the only valid ground for distinguishing landless from capitalists also has the effect of destroying the privileged character of labour. [Pg.325]

The downstream tier determines the equilibrium prices to acquire the recycled items from its preceding upstream tier. We refer to the price-flow contract as the flow function. We assume that the transportation cost for the shipment of the recycled item between any two tiers is paid by the downstream tier entity. The price the downstream tier entity pays for transportation is taken into account by the... [Pg.163]

A typical supply-demand situation for an industry in which there is perfect competition is qualitatively illustrated in Figure 2.5a. The supply and demand curves intersect at an equilibrium price, representing a stable situation in which supply equals demand. If supply temporarily exceeds the equilibrium value, the market price will have to be lowered to sell off any excess product (step 1 in Figure 2.5b). This lowered price in turn will cause production Q to decrease in the next time period (step 2). A decrease in Q below the equilibrium point will cause a shortage and induce the price to rise (step 3), which will cause total production to increase in the next period (step 4). But this increase will in turn cause a drop in demand. This postulated cobweb process will continue until the equilibrium is reestablished. The adjustment process requires the existence of ... [Pg.55]

Shifts in the demand curve can also cause the equilibrium price to change. When a new use is found for the product, the demand curve may move from to D as shown in Figure 2.6b. If the demand shift causes the equilibrium price to shift upward, new firms may be attracted into the industry or existing firms may increase production capability, causing a supply shift and readjustment of price downward. Alternatively, a decrease in demand (causing the equilibrium price to shift downward) may cause firms to withdraw from the industry and the price to readjust upward. [Pg.56]

The Ho-Lee (1986) model was one of the first arbitrage-free models and was presented using a binomial lattice approach, with two parameters the standard deviation of the short-rate and the riskpremium of the short-rate. We summarise it here. Following Ho and Lee, let ( ) be the equilibrium price of a zero-coupon bond maturing at time T under state i. That is F( ) is a discount... [Pg.54]

An ideal market can be perfectly described by the aggregate quantity supplied by sellers and the aggregate quantity demanded by buyers at every price-point (i.e., the market s supply and demand schedules, Fig. 1). As prices increase, in general there is a tendency for supply to increase, with increased potential revenues from sales encouraging more sellers to enter the market while, at the same time, there is a tendency for demand to decrease as buyers look to spend their money elsewhere. At some price-point, the quantity demanded will equal the quantity supplied. This is the theoretical market equilibrium. An idealised theoretical market (and many real ones) has a market equilibrium price and quantity (Po Qo) determined by the intersection between the supply and demand schedules. The dynamics of competition in the market will tend to drive transactions toward this equilibrium point. For all prices above Pq, supply will exceed demand, forcing suppliers to reduce their prices to make a trade whereas for all prices below Pq, demand exceeds supply, forcing buyers to increase their price to make a trade. Any quantity demanded or supplied below Qo is called... [Pg.25]

Fig. 1. Supply and Demand curves (here illustrated as straight lines) show the quantities supplied by sellers and demanded by buyers at every price-point. In general, as price increases, the quantity supplied increases and the quantity demanded falls. The point at which the two curves intersect is the theoretical equilibrium point where Qo is the equilibrium quantity and Po is the equilibrium price. Fig. 1. Supply and Demand curves (here illustrated as straight lines) show the quantities supplied by sellers and demanded by buyers at every price-point. In general, as price increases, the quantity supplied increases and the quantity demanded falls. The point at which the two curves intersect is the theoretical equilibrium point where Qo is the equilibrium quantity and Po is the equilibrium price.
Smith s Alpha. Following Vernon Smith [20], we measure the equilibration (equilibrium-finding) behaviour of markets using the coefficient of convergence, a, defined as the root mean square difference between each of n transaction prices, p (for i = I... n) over some period, and the Pq value for that period, expressed as a percentage of the equilibrium price ... [Pg.26]

Allocative Efficiency. For each trader, i, the maximum theoretical profit available, TT, is the difference between the price they are prepared to pay (their limit price ) and the theoretical market equilibrium price, Pq. Efficiency, E, is used to calculate the performance of a group of n traders as the mean ratio of realised profit, 7Tj, to theoretical profit, tt ... [Pg.26]

Profit Dispersion. Profit dispersion is a measure of the extent to which the profit/utility generated by a group of traders in the market differs from the profit that would be expected of them if all transactions took place at the equilibrium price, Pq. For a group of n traders, profit dispersion is calculated as the root mean square difference between the profits achieved, ttj, by each trader, i, and the maximum theoretical profit available, tt ... [Pg.26]

Low values of Kdis indicate that traders are extracting actual profits close to profits available when all trades take place at the equilibrium price Pq. In contrast, higher values of Tv isp indicate that traders profits differ from those expected at equilibrium. Since zero-sum effects between buyers and sellers do not mask profit dispersion, this statistic is attractive [17]. [Pg.27]

When the market is normal, the equilibrium price is P. When this is not so, the difference between the actual price and equilibrium price is p, = P, — P). [Pg.293]

In this section, we tie together the mechanism design approach and the competitive equilibrium approach. The basic idea is to construct efficient ascending-price auctions that terminate with the outcome of the VCG mechanism. With this, price-taking behavior is a game-theoretic equilibrium of the auction despite the effect that an agent s bids might have on future price dynamics. The auctions provide a dynamic method to compute a set of competitive equilibrium prices, from which allocative efficiency follows. [Pg.159]

Assume myopic best-response strategies. Formulate a linear program (LP) for the efficient allocation problem. The LP should be integral, such that it computes feasible solutions to the allocation problem, and have appropriate economic content. This economic content requires that the dual formulation computes competitive equilibrium prices that support the efficient allocation, and that there is a solution to the dual problem that provides enough information to compute VCG payments. [Pg.160]


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See also in sourсe #XX -- [ Pg.422 ]

See also in sourсe #XX -- [ Pg.55 ]




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