Questions tagged [markets]

A market is an institutional arrangement in which buyers and sellers exchange goods, services, or information in transactions with or without money.

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11
votes
3answers
394 views

Can econometrics test for correlation or causality between prices and corruption?

This week there was news that some prices are rising. I heard that in some countries where corruption is high the prices are also higher. I wonder if there is causaility or just both at same. It would ...
10
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5answers
2k views

Why isn't the cost of shoes affected by their size?

I have noticed that many shoe selling shops I have visited have the same price tag regardless of the shoe size. Intuitively I'd think the bigger the shoe the more material and consequently capital ...
7
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4answers
3k views

Is market failure constant? What properly defines it?

My textbook defines market failure as when "the production or consumption of a good or service causes additional positive or negative externalities on a third party not involved in the economic ...
7
votes
1answer
1k views

Benefits of a cartel among firms

Suppose I have $n>2$ firms selling differentiated products. These firms form a cartel for the price. The cartel has size $n_c$. Let $\pi_{i,m}$ be the payoff of a firm $i$ outside the cartel and $\...
6
votes
2answers
337 views

Understanding Vernon Smith's 1962 “An Experimental Study of Competitive Market Behavior”

Vernon Smith's 1962 paper "An Experimental Study of Competitive Market Behavior" simulates a market using students (who have piece of paper giving their reservation prices). In one of the ...
6
votes
3answers
185 views

When to use the market and when to use central planning?

I have a basic question: my understanding is that in a market economy, economic decisions are governed by prices, i.e prices signal what should be produced & how much. This is opposed to central ...
5
votes
1answer
58 views

Are stock exchanges market makers?

Are stock exchanges like NASDAQ and NYSE market makers? In other words, are they providing liquidity by pairing individual buyers and sellers with each other in real-time? Or does it work differently?
5
votes
1answer
230 views

If Germany is the largest exporter, why do Chinese products pervade the the US market?

Despite Germany being the third larger exporter in the world, I have not once seen German products on online retail sites such as Amazon.com, NewEgg, BestBuy, or any retailer in the US really. Why is ...
5
votes
0answers
92 views

Auction mechanism with no trusted third-party

I have been using a double-auction mechanism to solve a two-sided market where multiple agents are competing to supply/use slices of a shared resource. The owner of the resource is a trustable third-...
5
votes
0answers
26 views

Why do co-ops dominate in certain markets rather than more-conventional enterprises?

Why do co-ops dominate in certain markets rather than more-conventional enterprises? For example, the US dairy processing market seems to be dominated co-ops like Land'O Lakes and Dairy Farmers of ...
4
votes
2answers
322 views

“For a market to exist there must be scarcity” (T/F)

The answer provided was 'true', that scarcity was necessary in the existence of a market. But isn't that not always true? For example, there's a market for canned air, and air is most definitely not ...
4
votes
2answers
11k views

How can the abuses of monopoly power lead to market failure?

So I know that the abuses of monopoly power can cause market failure, but I don't know why that is. I am guessing that because monopoly's face a lack of competition, they have no incentive to improve ...
4
votes
1answer
231 views

Properties of Financial Markets in Real Life

When studying financial economics, three concepts appear everywhere Equilibria (investors maximise utility, markets clear and aggregated demand equals aggregated supply) Completeness (there are ...
4
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2answers
787 views

What are the most recent devopments with applying fractals to economics?

I was researching fractals for my senior mathematics presentation and discovered that one of the most recent pioneers in that section of the field was able to apply fractal mathematics to the field of ...
4
votes
1answer
181 views

What has been the reception of Posner & Weyl’s claim that property rights lead to market power?

Posner & Weyl claim that property rights lead to monopoly rents: Property Is Only Another Name for Monopoly Radical Markets Have their claims been elaborated, tested, or peer-reviewed? In ...
4
votes
3answers
6k views

Why is the Market-Clearing Price also an Equilibrium Price?

When the price is such that supply equals demand for e.g. bicycles, everybody who wants to buy a bike at that price gets one, and every bike gets sold. Everybody goes home happy and the marketplace ...
4
votes
1answer
42 views

Prediction market based on LMSR: Sell, or buy other side?

Consider a prediction market with two outcomes (Yes and No) and a scoring rule based on Hansons’s LMSR, i.e. ln(ea+eb), where a and b are the number of Yes resp. No shares sold. Assume that I have ...
4
votes
2answers
2k views

What would happen if stock markets were open 24 hours?

Suppose you are a broker or a trader, and the stock markets will be open 24 hours a day. What would be the implication for you as a broker in this scenario? I mean: How will your strategies change? ...
4
votes
1answer
1k views

Why is food less expensive in India than the United States?

India has 4x the population, less land, and far worse technology and infrastructure than the United States. Shouldn't food cost in the US be less expensive? I've never been to India, but it seems like ...
4
votes
1answer
61 views

Is there any historical example that a market is shrinking down after competition?

I was told that the advertising market as a whole shrank after Google became part of the marketing industry. Apparently, the decrease occurred in offline markets as well as online markets. Is this a ...
4
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0answers
32 views

Order-driven vs quote-driven markets

What is the difference between order driven and quote driven markets? Is there any theoretical microstructure book that gives the intuition behind the types of markets with respect to the orders that ...
4
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0answers
67 views

Why do two-sided marketplaces often charge both sides of the transaction?

Why do marketplace apps often charge both sides of the transaction, when charging one side could raise as much (or more) revenue and be simpler? i.e. if the marketplace knows which side of the market ...
3
votes
3answers
200 views

Increasing returns, implications?

If a firm has increasing returns to scale (i.e., doubling inputs more than doubles output) would that firm logically end up being the sole firm in its sector in the long run? If not, what is the ...
3
votes
3answers
1k views

Why does Venezuela have such a high Big Mac Index?

Venezuela is ranked #2 in the 2014 Big Mac Index at \$7.15 per Big Mac. You can see the graph here. However, Venezuela is not a very rich country, having a gross domestic product of \$11,789 per ...
3
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3answers
119 views

Economic anthropology: Have there been cultures / societies without a market?

I was having a discussion about whether the "market" or "markets" always and inherently emerge as long as human societies exist. Given the definition of market as the interplay of ...
3
votes
1answer
1k views

Why do externalities lead to a Pareto-inefficient outcome?

So we know that under a Pareto-inefficient outcome, there is room for Pareto improvement, i.e. making someone better off without hurting anyone. Assume that there is a drug company which is in ...
3
votes
1answer
70 views

Pareto efficiency of organ markets

Organ sale is legal in Iran. I was wondering: are organ markets Pareto efficient? Or could an argument be made for them being Pareto efficient? I have been thinking that both the buyer and the seller ...
3
votes
1answer
73 views

Understanding agents selecting among markets

Let's say an entrepreneur can choose between starting a business in a competitive market with zero economic profit, and starting a business in a market that is not perfectly competitive with positive ...
3
votes
1answer
104 views

Episodes of Housing Crashes and Never Recovering

Looking at many housing markets in major cities around the world today it looks like most (London, New York, Sydney, Beijing, Toronto,...) have become totally detached from the earnings of the local ...
3
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2answers
2k views

Are market structures on a spectrum?

So I understand that each market structure has their own characteristics, and that for instance Perfect Competition involves high competition, and I believe Monopolistic competition slightly less so, ...
3
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0answers
38 views

Theoretical models of copyright infringement and efficiency implications

I wanted to know if there are theoretical models of copyright infringement and what are their implications for efficiency in the market and also, if possible, any empirical support they have. When I ...
3
votes
1answer
135 views

Why are Americans at the top of nearly every field?

I live in India, and having spent several years in America before returning, I noticed that Americans dominate in nearly every sphere of human activity. For example, the US seems to be blessed with ...
3
votes
0answers
202 views

Fundamental Theorem of Asset Pricing (Linear Algebra)

I saw this question in a textbook that I was recently reading and don't really know how to aprpoach this problem. Let $H$ be a finite dimensional vector space with inner product ($\cdotp$, $\cdotp$)....
3
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0answers
97 views

Europe not self-sufficient in terms of food requirements and consumption?

An acquaintance once told me that Europe is not self-sufficient in terms of food consumption as it does not have enough farmland and farmers to produce enough for all its people, especially in terms ...
3
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0answers
144 views

With OPEC driving the prices of oil down, can American producers simply store oil produced at higher cost to sell later? [closed]

I have been wondering. With OPEC driving down the price of oil in order to stifle the growth of the American oil industry, what can we do about it? More specifically, why don't these oil producers ...
2
votes
1answer
48 views

Access to the markets for a country

What does it mean for a country to have access to the markets. E.g: There is an ongoing discussion when Greece will follow a prosperity path in order to enter again the "markets".
2
votes
1answer
505 views

Competitive vs complete and non-competitive vs incomplete marekts

The very insightful questions that arise, when someone studies micro foundation are the following: What is the difference between competitive and complete marekts? When we refer to the first is it ...
2
votes
2answers
527 views

Why currency purchasing power is linked to confidence in central banks

From the New Statesman, http://www.newstatesman.com/politics/economy/2016/02/coming-storm, "Ever since the collapse of the Bretton Woods system of pegged exchange rates in 1971, the sole guarantee ...
2
votes
2answers
258 views

What are the assumptions behind calculating the market equilibrium from supply and demand curves?

Imagine that there are 5 buyers (B1,...,B5) with maximum willingness to pay as follows: B1 = $5 B2 = $4 B3 = $3 B4 = $2 B5 = $1 Imagine that there are 5 sellers (...
2
votes
1answer
53 views

How did Cowen and Tabarrok calculate the probability of Hewlett-Packard sales?

The discussion on prediction markets in the chapter on the price system in Tyler Cowen and Alex Tabarrok's Modern Principles of Economics, Second Edition (pp. 123-124) contains the following ...
2
votes
1answer
2k views

Stock vs flow variables

How could I decide from a variable exactly, that is stock or flow type? Variables, which are measured at a point of time are ...
2
votes
1answer
28 views

Does stronger regulation of economic activity impede economic growth in constitutional democracies with basic constitutional rights?

Given similar democratic constitutions and basic constitutional rights such as property rights, freedom of speech, freedom of press etc and the definition of regulation according to OECD: Regulation ...
2
votes
1answer
34 views

Does the theory of contestable markets apply to industries where there is a natural monopoly?

The theory contestable markets requires that there be no barriers to entry, no sunk costs, and access to the same level of technology. I know common industries that have natural monopolies (like ...
2
votes
2answers
216 views

It's unclear how market equilibrium is reached in case of overproduction

Let's assume that there is disequilibrium, namely that $P=P_2$, thus $Q_s > Q_d$. In other words, there is overproduction. This is perfectly competitive market, so competition between producers ...
2
votes
2answers
6k views

Is the marginal cost the same for every firm in a perfectly competitive market?

Spin-off from: market equilibrium quantity $\ne$ firm profit maximising quantity? Consider a perfectly competitive market with equilibrium price $P_{eq}$ and quantity $Q_{eq}$ and firm with profit ...
2
votes
1answer
670 views

Where can I find statistics for numbers of 16-20 year olds in the world?

Where can I find statistics about how many 16-20 years old people do live in the world? If there is no such statistics, how about people in this age-range in europe+amerika?
2
votes
2answers
78 views

Why will inflation raise sellers' purchasing power?

According to my textbook, in the chapter on inflation, "When a price rises, buyers of that good must pay more, but sellers get more revenue when they sell it. The loss in buyers' purchasing power is ...
2
votes
1answer
147 views

When to prefer maximisation of surplus and when instead to prefer minimising differences in price and q to find market equilibrium?

Two alternative approaches to compute a market equilibrium (in static analysis) are either to minimize the differences (either using abs() or a quadratic diff) between supply-demand quantities and ...
2
votes
1answer
596 views

Under what conditions does market failure occur?

Edit: Is it possible to broadly categorize the ways in which market failures occur into relatively few categories? If so, what are they?
2
votes
2answers
47 views

We see stocks outperforming things like bonds in the long run (past 100 years), but could this be an artifact of that particular 100 year timeline?

When looking at historical return patterns for investments, one can clearly see the stellar performance of equities over the long haul. That being said, we know that we can center in on certain 20-25 ...