In 1981, the US dairy industry experienced a major change in federal policy. From 1950 until 1981 farm level milk prices were supported at a minimum of 75 to 90 percent of parity. Under parity the support price and farm level milk prices trended upward most years. But in 1981, support prices were de-coupled from the parity index. Instead, the support price would be based on the level of milk su...

Abstract Not only the amount of product demand but also the prices of the product have a strong impact on a manufacturer’s revenue. In this paper we consider a continuous-time inventory model where the spot price of the product stochastically fluctuates according to a Brownian motion. Should information of the spot price be available, the manufacturer wishes to buy the product from the spot mar...

It is straightforward to evaluate how a perfectly-optimizing, perfectly-informed customer will respond to a non-linear price schedule, but such a customer is rare. In the common case of increasing-block pricing of water and electricity, consumers do not know what marginal price they face during a billing period, because they do not know what demand shocks will occur during the period. If consum...

Many economists and policy makers have long favoured price instruments based on the fact that climate chance involves stock pollutants and as such probably exhibits relatively flat marginal benefits. We construct two simple examples that help to clarify the role of uncertainty in the analysis of price or quantity controls of stock pollutants. Our contribution is the simplicity of the model and ...

We document that fear about misspecified economic and central bank policies explain 45% of variations in bond option implied volatilities and interest rate volatilities. We endogenize this empirical pattern with a parsimonious equilibrium asset pricing model. In equilibrium, volatility is endogenously driven by fear of not knowing the data generating process that drives future economic and futu...

A fixed exchange rate limits the ability of the real exchange rate to adjust to shocks, and tends to raise the volatility of real GDP. But adjustment may be enhanced if internal prices are more flexible under a fixed exchange rate. This paper develops a model in which price setters incur a cost to retain the option of ex-post price flexibility. The benefit of flexibility is increasing in the va...

We present a micro-founded search-theoretical model of money in which agents are subject to idiosyncratic liquidity shocks as well as aggregate productivity and monetary shocks. Monetary policy has redistributive effects and persistent effects on output and prices: aggregate shocks will propagate and diffuse gradually as the money distribution adjusts over time. The model is used to study the c...

Over the 1980s and 1990s, monetary policy in most industrialized countries has focussed increasingly on achieving rates of inflation at or close to price stability. The result in the 1990s has been a remarkable convergence in these economies towards relatively low rates of inflation. In some countries, such as New Zealand, Canada, the United Kingdom, and Sweden the move towards price stability ...

Bils, Klenow and Malin (2009) recently constructed an empirical measure of reset price inflation (i.e. the rate of change of all "desired" prices) for the US economy, by using the micro-data underpinning the CPI and evaluated whether the existing pricing models can explain both the observed reset inflation and aggregate inflation. They found that time-dependent models and state-dependent models...

Rice plays an especial role in Iranian households' nutrition basket. The volatilities of its price during recent years caused consumers' dissatisfaction. This paper investigates spillover effects of price volatilities (at the wholesale and retail levels) in the Guilan Province rice market. The Generalized Autoregressive Conditional Hetroscedasitic (GARCH) model was used for the monthly time per...