scholarly journals Supply and Demand Risks in Laboratory Forward and Spot Markets: Implications for Agriculture

2000 ◽  
Vol 32 (1) ◽  
pp. 159-173 ◽  
Author(s):  
Dale J. Menkhaus ◽  
Chris T. Bastian ◽  
Owen R. Phillips ◽  
Patrick D. O'Neill
Keyword(s):  
Supply And Demand ◽  
Experimental Methods ◽  
Spot Market ◽  
Spot Markets ◽  
Market Institutions ◽  
Equilibrium Outcome ◽  
Market Outcomes ◽  
Forward Market ◽  
Total Surplus ◽  
Forward Trading

AbstractLaboratory experimental methods are used to investigate the impacts of supply and/or demand risks on prices, quantities traded, and earnings within forward and spot market institutions. Random demand and/or supply shifts can be as much as 25 percent of the expected equilibrium outcome. Nevertheless, results suggest that the spot or forward trading institution itself has a greater influence on market outcomes than the presence of risk within the trading institution. Sellers tend to have relatively higher earnings in a spot market than buyers, regardless of the risk. Total surplus, however, generally is greater in a forward market.

scholarly journals An Experimental Economics Approach to Analyzing Price Discovery in Forward and Spot Markets

1997 ◽  
Vol 29 (2) ◽  
pp. 327-336 ◽  
Author(s):  
Joseph L. Krogmeier ◽  
Dale J. Menkhaus ◽  
Owen R. Phillips ◽  
John D. Schmitz
Keyword(s):  
Experimental Economics ◽  
Laboratory Experiments ◽  
Price Discovery ◽  
Spot Market ◽  
Spot Markets ◽  
Forward Markets ◽  
Forward Market ◽  
Pricing Behavior ◽  
The Difference ◽  
Supply Schedule

AbstractLaboratory experiments are used to generate data that facilitate investigation of pricing behavior in forward and spot markets. Results suggest a tendency for prices in a spot market to converge to levels higher than those in a forward market. The difference in these market environments is the supply schedule. Buyers in a spot market are aware that supply is inelastic and become relatively aggressive bidders. Forward markets have a relatively elastic supply schedule and buyers fare better. This may motivate firms to promote forward markets and/or vertically integrate in the procurement of inputs.

scholarly journals Subsidy Incidence in Privately Negotiated Spot Markets: Experimental Evidence

2019 ◽  
Vol 51 (02) ◽  
pp. 219-234
Author(s):  
Mohammad Maksudur Rahman ◽  
Christopher T. Bastian ◽  
Chian Jones Ritten ◽  
Owen R. Phillips
Keyword(s):  
Experimental Evidence ◽  
Statistical Difference ◽  
Experimental Methods ◽  
Spot Markets ◽  
Market Outcomes ◽  
Economic Agents ◽  
Subsidy Incidence

AbstractWe use experimental methods to investigate subsidy incidence, the transfer of subsidy payments from intended recipients to other economic agents, in privately negotiated spot markets. Our results show that market outcomes in treatments with a subsidy given to either buyers or sellers are significantly different from both a no-subsidy treatment and the competitive prediction of a 50% subsidy incidence. The disparity in incidence across treatments relative to predicted levels suggests that incidence equivalence does not hold in this market setting. Moreover, we find no statistical difference in market outcomes when benefits are framed as a “subsidy” versus a schedule shift.

Analysis of Bundling Homogeneous Content Product in Different Formats

2018 ◽  
Vol 11 (4) ◽  
pp. 63-83
Author(s):  
Li Chen
Keyword(s):  
Competitive Advantage ◽  
Book Industry ◽  
Equilibrium Outcome ◽  
Total Surplus ◽  
Digital Format ◽  
Print Book ◽  
Online Book ◽  
Period Model

Content digitalization brings products with homogeneous content but in different formats (digital format and physical format) together. Recently retailers in the online book industry started bundling programs such as Amazon Matchbook, giving print book buyers a free or deeply discounted e-book version. While this bundling strategy is attractive to consumers, it potentially allows consumers to resell the print book in the bundle, which might cannibalize retailers' sales. Consequently, it will influence all participants in the industry including the publisher, the retailers, and the consumers. Using a two-period model, the authors investigate the impacts of this strategy under both monopoly and competition. The authors compute the equilibrium outcome for both scenarios. The findings show that (1) under monopoly, both the publisher and the retailer sell at a higher rate; consumers also see higher total surplus; (2) under competition, the retailer who provides bundling will gain a competitive advantage. This study indicates that the bundling model yields a win-win strategy.

A reserves driven view of the eastern Australian gas supply and demand balance through the 2020's

2017 ◽  
Vol 57 (2) ◽  
pp. 526
Author(s):  
Will Pulsford
Keyword(s):  
Supply And Demand ◽  
Critical Role ◽  
South Australia ◽  
Market Outcomes ◽  
Natural Gas Markets ◽  
Eastern Australia ◽  
Gas Market ◽  
Gas Fields ◽  
Key Participants ◽  
Gas Supply

The Australian Energy Market Operator (AEMO) issued a Gas Statement of Opportunities in March 2016, which reports that gas supply to the domestic and liquefied natural gas markets in eastern Australia will be largely satisfied by proved and probable reserves until 2026 and by the addition of contingent resources until 2030. However, in parallel, there are widely reported concerns by energy consumers of insufficient gas supplies to meet demand by the early 2020s and a lack of new gas supplies to replace existing expiring contracts. Gas shortages have already contributed to black outs and load shedding events in South Australia. This paper reviews the eastern Australian gas supply position at a basin level. The AEMO basin level supply forecasts are reviewed and adjusted to generate forward profiles, which are consistent with reported reserves levels, production histories and depletion behaviour of typical gas fields. The revised supply forecast is compared with the AEMO’s demand profiles, and the likely commercial behaviour of key participants in the market is considered to build a picture of the domestic gas supply-demand balance through the 2020s. This analysis provides a transparent link from market outcomes back to the underlying reserves classifications to guide interpretation of supply-demand forecasts, and highlights the critical role of key suppliers in the eastern Australian gas market in the coming decade.

scholarly journals Classroom Games: A Market for Lemons

1999 ◽  
Vol 13 (1) ◽  
pp. 205-214 ◽  
Author(s):  
Charles A Holt ◽  
Roger Sherman
Keyword(s):  
Asymmetric Information ◽  
Market Failure ◽  
Quality Standards ◽  
Full Information ◽  
Information Market ◽  
Market Outcomes ◽  
Market Prices ◽  
Total Surplus ◽  
Quality Grade ◽  
Low Levels

The incentives that arise in markets with asymmetric information are illustrated in the classroom exercise presented here. Student sellers choose both a quality ‘grade’ and a price for their products. Initially, both prices and grades for all sellers are posted, and buyers select from these offerings. In this full-information setup, the market prices and grades quickly reach efficient levels that maximize total surplus. Next, although sellers continue to choose grades and prices, only prices (not grades) are posted for buyers to see when they shop. The grades and prices then fall to inefficiently low levels. The observed market outcomes in this exercise can stimulate useful discussion of asymmetric information, market failure, and remedies such as quality standards and warranties.

Spatially correlated rainfall in a protective irrigation system

2006 ◽  
Vol 11 (2) ◽  
pp. 179-199 ◽  
Author(s):  
JOHANNUS A. JANMAAT
Keyword(s):  
Irrigation System ◽  
Supply And Demand ◽  
Spot Market ◽  
Expected Returns ◽  
Return Volatility ◽  
Rainfall Events ◽  
Spatially Correlated ◽  
Complete Market ◽  
Water Surplus ◽  
The Impact

Allowing water to be traded in an irrigation system with de facto riparian rights can increase the efficiency of water use. With irrigation supplementing uncertain rainfall, both supply and demand for water are uncertain. When rainfall events are positively correlated, water supply and demand movements are negatively correlated, causing large price fluctuations. Using a stylized two crop, two region irrigation system, numerical integration over a bivariate rainfall distribution is used to demonstrate the impact of varying rainfall correlation on water price, expected returns, and return variability. A spot market for water captures the majority of the returns to water rights transfers, relative to a complete market. This spot market results in higher returns and reduced return volatility for farmers in the water deficit region, while farmers in the water surplus region see greater returns but also greater return volatility.

scholarly journals Relationship of Causality Between Spot And Futures Markets of Borsa Istanbul Index 30 and Dow Jones Industrial Average

2019 ◽  
Author(s):  
Letife Özdemir ◽  
Ercan Özen ◽  
Simon Grima
Keyword(s):  
Futures Markets ◽  
Price Discovery ◽  
Emerging Market ◽  
Spot Market ◽  
Spot Markets ◽  
Regression Equations ◽  
International Level ◽  
Causality Test ◽  
Futures Contract ◽  
Causality Relationship

Futures markets are mainly used as a tool for price discovery and for risk management on the spot markets and enable diversification for international portfolio investments. With this study we aim (1) to investigate the causality relationship between futures markets and spot market and (2) to examine the causality relationship between futures markets and spot markets in different countries. We are interested in both the futures markets - spot market relations and the interactions between the markets at international level. For variables we used the the BIST30 spot index and BIST30 futures contract representing the Borsa Istanbul market and the Dow-Jones 30 index and Dow-Jones 30 futures contract, which are the most important indices representing the US markets. Daily closing price data for the period between 2nd January, 2009 and 18th June, 2018 were analyzed using correlation, unit root test, causality test and regression equations. The results of the study show that the futures markets continue their price discovery role for both the spot markets and futures markets and are influential on other futures and spot markets at international level. These findings are important for investors wanting to invest in Turkey and in similarly considered emerging market economies. It will help investors take informed decisions by providing them with a more efficient price estimations utilizing the futures markets.

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