EconStor Community:
http://hdl.handle.net/10419/82
2017-02-20T06:30:39ZNumber of firms, rationing, matching, and knowledge: A comprehensive study of variations in experimental Kreps-Scheinkman markets
http://hdl.handle.net/10419/125821
Title: Number of firms, rationing, matching, and knowledge: A comprehensive study of variations in experimental Kreps-Scheinkman markets
Authors: Jacobs, Martin
Abstract: This study provides a comprehensive picture of experimental Kreps-Scheinkman markets with capacity choice in the first stage and subsequent price competition at the second. We conduct seven different treatments of such markets, varying the number of firms, the demand rationing scheme, the subject matching, and subjects' knowledge about the market mechanism. We find that only the number of firms entails a persistent effect on capacity choices. Price choices are affected by both the number of firms and the rationing scheme. Subjects in the high-knowledge condition behave in the same manner from the first periods as subjects with low knowledge do in later periods after having gained experience. In all treatments conduct is generally more competitive than the Cournot outcome, irrespective of whether the Cournot outcome is the Nash equilibrium or not. Nevertheless, the Cournot model entails some predictive power. Exact Cournot choices are more likely to occur for both capacities and prices under efficient demand rationing, where the Cournot outcome is the equilibrium, than under proportional rationing.2016-01-01T00:00:00ZBertrand-Edgeworth markets with increasing marginal costs and voluntary trading: Experimental evidence
http://hdl.handle.net/10419/125822
Title: Bertrand-Edgeworth markets with increasing marginal costs and voluntary trading: Experimental evidence
Authors: Jacobs, Martin; Requate, Till
Abstract: Price competition with increasing marginal costs, though relevant for many markets, appears as an under-researched field in the experimental oligopoly literature. We provide results from an experiment that varies the number of firms as well as the demand rationing and matching schemes in Bertrand-Edgeworth markets with increasing marginal costs and voluntary trading. We find that prices and profits are substantially higher in duopoly than in triopoly and with proportional compared to efficient demand rationing. The matching rule has little effect on prices and profits. Nash equilibrium predictions do not capture observed behavior. Neither the mixed-strategy Nash equilibria of the underlying one-shot game nor, for the fixed matching condition, the symmetric stationary outcome pure-strategy Nash equilibria of the infinitely repeated game are supported by the data. In contrast to results from related experiments, behavior is largely more competitive than predicted by Nash equilibrium theory. Individual pricing decisions can predominantly be explained by either myopic best responses (Edgeworth cycles) or simple imitative behavior, where the complexity of the decision situation plays a crucial role in which behavioral pattern applies.2016-01-01T00:00:00ZMeasuring the frequency dynamics of financial and macroeconomic connectedness
http://hdl.handle.net/10419/125824
Title: Measuring the frequency dynamics of financial and macroeconomic connectedness
Authors: Barunik, Jozef; Krehlik, Tomas
Abstract: We propose a general framework for measuring frequency dynamics of connectedness in economic variables based on spectral representation of variance decompositions. We argue that the frequency dynamics is insightful when studying the connectedness of variables as shocks with heterogeneous frequency responses will create frequency dependent connections of different strength that remain hidden when time domain measures are used. Two applications support the usefulness of the discussion, guide a user to apply the methods in different situations, and contribute to the literature with important findings about sources of connectedness. Giving up the assumption of global stationarity of stock market data and approximating the dynamics locally, we document rich time-frequency dynamics of connectedness in US market risk in the first application. Controlling for common shocks due to common stochastic trends which dominate the connections, we identify connections of global economy at business cycle frequencies of 18 up to 96 months in the second application. In addition, we study the effects of cross-sectional dependence on the connectedness of variables.2016-01-01T00:00:00ZAn incomplete markets explanation of the UIP puzzle
http://hdl.handle.net/10419/125825
Title: An incomplete markets explanation of the UIP puzzle
Authors: Rabitsch, Katrin
Abstract: A large literature attributes failure of uncovered interest rate parity (UIP) to the existence of a timevarying risk premium. This paper presents a mechanism in a simple two-country two-good endowment economy with incomplete markets that generates sizeable deviations from UIP. In a parameterization where international wealth effects are important, liquidity constraints on an internationally traded bond and agents' strong resulting precautionary motives successfully generates a time-varying risk premium: countries that have accumulated large outstanding external positions have, being closer to the constraints, stronger precautionary motives and their asset carries a risk premium.2016-01-01T00:00:00Z