A key task for economists is predicting how markets will respond to complex changes in environment. This column discusses recent empirical developments that allow for a deeper understanding of such market dynamics. Game theory has informed conditional pricing models that take account of products marketed and their production costs. Likewise, dynamic models of productive efficiency allow for analyses of the role of market structure in inducing competitive efficiencies.
Ariel Pakes, 20 June 2016
Alberto Cavallo, Brent Neiman, Roberto Rigobon, 22 August 2014
What happens to prices when a country joins a currency union, and do prices behave differently in a pegged exchange rate regime? This column sheds lights on these questions by using evidence from Latvia, whose currency was pegged to the euro before the country became a Eurozone member on 1 January 2014. The authors find that clothing retail prices in Latvia completely converged to those in other Eurozone countries.
Joel Waldfogel, Ben Shiller, 25 November 2007
Did Apple forgo potential revenue for years? Until recently, its iTunes music store employed uniform pricing. This column uses a willingness to pay survey to show how alternative pricing schemes could have raised more revenue. Non-uniform pricing might have raised revenues by as much as 28%, and Apple could have substantially increased its revenues without reducing consumers’ welfare.