scholarly journals An Impulse-Regime Switching Game Model of Vertical Competition

2021 ◽  
Author(s):  
René Aïd ◽  
Luciano Campi ◽  
Liangchen Li ◽  
Mike Ludkovski
Keyword(s):  
Vertical Integration ◽  
Regime Switching ◽  
Nash Equilibria ◽  
Commodity Price ◽  
Commodity Markets ◽  
Gasoline Price ◽  
Oil Market ◽  
Strategic Competition ◽  
Pass Through ◽  
Switching Game

AbstractWe study a new kind of nonzero-sum stochastic differential game with mixed impulse/switching controls, motivated by strategic competition in commodity markets. A representative upstream firm produces a commodity that is used by a representative downstream firm to produce a final consumption good. Both firms can influence the price of the commodity. By shutting down or increasing generation capacities, the upstream firm influences the price with impulses. By switching (or not) to a substitute, the downstream firm influences the drift of the commodity price process. We study the resulting impulse-regime switching game between the two firms, focusing on explicit threshold-type equilibria. Remarkably, this class of games naturally gives rise to multiple potential Nash equilibria, which we obtain thanks to a verification-based approach. We exhibit three candidate types of equilibria depending on the ultimate number of switches by the downstream firm (zero, one or an infinite number of switches). We illustrate the diversification effect provided by vertical integration in the specific case of the crude oil market. Our analysis shows that the diversification gains strongly depend on the pass-through from the crude price to the gasoline price.

Financialization of Commodity Markets

2018 ◽  
Author(s):  
Kyle J. Putnam
Keyword(s):  
Business Cycle ◽  
Futures Markets ◽  
Commodity Price ◽  
Commodity Markets ◽  
Commodity Futures ◽  
Futures Prices ◽  
Price Behavior ◽  
Risk And Return ◽  
Commodity Futures Markets ◽  
Asset Class

In the early 2000s, financial investors began pouring billions of dollars into the commodity futures markets seeking the unique investment benefits of this distinct asset class. This “financialization” process has called into question the fundamental risk and return properties of commodity futures as evidence has emerged favoring the idea that the massive increase in investor flows caused a rise in futures prices, volatility, and intra- and intermarket return correlations. However, a contrarian line of research contends that the effects of the new “speculative” capital on the futures markets are unsubstantiated and the increased participation of financial investors poses little consequence to the economics of the marketplace. This latter line of literature maintains that the investment benefits of commodity futures have not been diminished and that fundamental factors and business cycle variations can explain the observed changes in commodity price behavior.

scholarly journals Commodity price pass-through along the pricing chain

2021 ◽  
Author(s):  
Rebeca Jiménez-Rodríguez ◽  
Amalia Morales-Zumaquero
Keyword(s):  
Emerging Economies ◽  
Raw Materials ◽  
Commodity Prices ◽  
Commodity Price ◽  
Emerging Countries ◽  
Consumer Prices ◽  
Advanced Economies ◽  
The World ◽  
Producer Prices ◽  
Pass Through

AbstractThis paper analyses the commodity price pass-through along the pricing chain for the global commodity price index and the indices of its main categories (i.e., agricultural raw materials, food and beverages, energy and metals) in the world, advanced and emerging economies. To do so, the study considers country-by-country vector autoregression models and pool the results by taking weighted means for 18 advanced economies and 19 emerging countries, as well as for the world (defined as the sum of advanced and emerging economies). The results show the following: (i) there is evidence in favour of partial pass-through from commodity prices to producer prices, although the evidence for the pass-through to consumer prices is less evident; (ii) the pass-through in the world seems to be led by both advanced and emerging countries for producer prices and only by advanced economies for consumer prices; (iii) higher prices in the four categories (agricultural raw materials only in the short-run) induce significant higher producer prices in almost all cases, with shocks in the prices of energy and metals showing the largest effects; and (iv) energy prices explain the highest variability of producer and consumer prices.

Rebel Primary Commodity Markets, Price Shocks, and Supplier Victimization

2021 ◽  
Author(s):  
Chelsea L Estancona
Keyword(s):  
Commodity Price ◽  
Commodity Markets ◽  
Price Shocks ◽  
Supplier Relationships ◽  
Primary Commodity ◽  
Level Data ◽  
Commodity Price Shocks ◽  
Reputational Costs ◽  
Municipal Level ◽  
Do So

Abstract Rebel organizations often benefit from the sale of primary commodities. However, producing these commodities may require labor from noncombatants. Rebels provide security and payment to civilian suppliers, but their ability to do so depends on consistent profits. How, then, do price shocks to labor-intensive primary commodities undermine rebel–supplier relationships? I hypothesize that negative commodity price shocks lead cash-strapped rebels to ensure suppliers’ loyalty by substituting coercion for positive incentives. Conversely, states seek to limit rapid increases in rebels’ profit while avoiding the reputational costs of civilian victimization. Thus, victimization of rebel suppliers from groups such as pro-government paramilitaries is hypothesized to increase after positive commodity price shocks. I test these hypotheses with a new dataset covering 1999–2007 that combines monthly US STRIDE (System to Retrieve Information from Drug Evidence) data on cocaine price with municipal-level data from the Colombian Centro Nacional de Memoria Histórica about the FARC (Fuerzas Armadas Revolucionarias de Colombia) and paramilitary groups’ use of civilian victimization.

Temporal Aggregation Effects in Gasoline Price Pass-Through in the U.S. Gulf Coast Region

2005 ◽  
Vol 11 (4) ◽  
pp. 483-484
Author(s):  
Michael Ye ◽  
John Zyren ◽  
Joanne Shore ◽  
Michael Burdette
Keyword(s):  
Gulf Coast ◽  
Temporal Aggregation ◽  
Gasoline Price ◽  
Pass Through ◽  
Gulf Coast Region ◽  
Coast Region ◽  
The U.S

scholarly journals Efficiency of Contractual Arrangements in Private Agricultural Product Markets

2000 ◽  
Vol 31 (4) ◽  
pp. 813
Author(s):  
Haleigh Boyd ◽  
Lewis Evans ◽  
Neil Quigley
Keyword(s):  
Vertical Integration ◽  
Social Life ◽  
Cost Effective ◽  
Commodity Price ◽  
Agricultural Product ◽  
Product Markets ◽  
Firm Level ◽  
Contractual Arrangements ◽  
Production Variability ◽  
The Individual

The electronic and information revolution is changing virtually all aspects of economic and social life, no more so than in the ability of firms of all sizes to make their mark in production and exporting. The ready access to vast information and the lower costs that now attend dealing with other firms have opened opportunities that never before would have been cost-effective at the individual firm level. These firms have to contract with other firms for all sorts of purposes. Because of the small size of agricultural and horticultural producers and special problems of seasonal production, variability in production and price, and product perishability, some of the most challenging contracts are in this sector.Co-operatives provide a vehicle for the vertical integration of production and processing in agriculture. The producers provide capital for and control the processing entity so that their interests are aligned. Returns to producers bundle together the commodity price and the return from the capital invested in processing.Many of the agricultural product markets in New Zealand operate within this co-operative structure, and in the case of the dairy industry, it is supported by statute. The forestry, wine and processed vegetable industries are notable exceptions in that these industries employ contracts between producers and processors as an alternative to vertical integration via co-operatives.In this article, we use examples of contracts between producers and processors in the forestry, wine and processed vegetable markets to consider the extent to which contracts may provide efficient vehicles for the alignment of interests between producers and processors in agricultural markets. We consider the ways in which these contracts:•Minimise transaction costs;•Use incentive mechanisms and monitoring to limit opportunism;•Allocate risk;•Facilitate investment in specific assets; and•Allocate property rights.We assess the implications of the annual crop cycles and perishability of grapes and vegetables with the longer crop cycles of forestry. We conclude that contracts appear to be viable alternatives to co-operative structures, even in the market for perishable agricultural products.

scholarly journals Oil, Hard Power and U.S. Hegemony

2017 ◽  
Vol 11 (2) ◽  
pp. 35-38 ◽  
Author(s):  
Joshua Nelson
Keyword(s):  
United States ◽  
Global Economy ◽  
Supply And Demand ◽  
Opec Country ◽  
The United States ◽  
Gasoline Price ◽  
Hard Power ◽  
Oil Market ◽  
Economic Control ◽  
The Many

In late 2014 and early 2015, the United States dramatically increased its presence in the oil market. This tremendous increase in production, which placed the United States ahead of every OPEC country besides Saudi Arabia, caused a global change in supply and demand that dropped the price of crude oil to $58 per barrel. This translated to an average gasoline price of $2.55 per gallon nationally on Dec. 15, 2014. The price drop reverberated throughout the global economy, affecting countries from Malaysia to Norway. In Venezuela, for example, it is estimated that a one dollar drop in the price of oil will cost the country approximately $770 million in annual revenue. The United States’ decision to act influenced the entire world, and this is no surprise – economic control is just one of the many facets of hard power and hegemony.

scholarly journals Inflation Expectations and the Pass-Through of Oil Prices

2021 ◽  
pp. 1-26
Author(s):  
Knut Are Aastveit ◽  
Hilde C. Bjørnland ◽  
Jamie L. Cross
Keyword(s):  
Oil Prices ◽  
Structural Var ◽  
Oil Price ◽  
Inflation Expectations ◽  
Oil Price Shocks ◽  
Price Shocks ◽  
Demand And Supply ◽  
The Great Recession ◽  
Oil Market ◽  
Pass Through

Abstract Inflation expectations and the associated pass-through of oil price shocks depend on demand and supply conditions underlying the global oil market. We establish this result using a structural VAR model of the global oil market that jointly identifies transmissions of oil demand and supply shocks through real oil prices to both expected and actual inflation. We demonstrate that economic activity shocks have a significantly longer lasting effect on inflation expectations and actual inflation than other types of real oil price shocks, and resolve disagreements around the role of oil prices in explaining the missing deflation puzzle of the Great Recession.

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