The scope of this study is to provide an understanding of crude oil price determination. The approach to this general problem starts by identifying the key areas that will help us achieve the specific objectives of the research which are the derivation of both a theoretical and an empirical framework of price formation. The areas examined are: depletion theory (chapter one), the evolution of the oil industry's structure and pricing practices (chapter two), the literature concerned with explaining that evolution (chapter three). A critique of that literature enables the derivation of the theoretical framework which can be called the transition period scenario - the transition from the centrally planned industry of the 1950s to the competitive market of the 1980s. Crude oil prices since .1970 have been determined not by a cartel of producers but by an imperfect market, within which inefficiencies, imperfect information, lags in adjustment and uncertainty together with the major oil companies fading power and the OPEC group following rather than leading the market - despite the perception of it as a cartel - have all combined to formulate prices. The attempt to confirm or reject that framework by empirical testing starts by choosing a specific methodology which is believed to be superior to conventional econometric techniques: The Box and Jenkin's approach to modelling time series, testing for causality patterns and determining lead and lag relationships, by thorough empirical investigation of the data rather than by arbitrary specification of causality directions and lag structures (chapter four). Application of that methodology to the data collected yields the results presented in chapters six and seven, which confirm the basic hypothesis and supply the functions which describe the true behaviour of the system and can therefore be used for forecasting. The major conclusion emerging from the study is that OPEC should not be thought of as a cartel. The demand for crude oil being a derived demand, it is the final consumers who will in the end dictate whether or not we are likely to face further price crises or whether spot markets will be calm and orderly. Nevertheless, the high proportion of world reserves in OPEC member countries means that OPEC can assist in the prevention of abrupt price changes by assuming a supervisory role rather than attempting in vain to assume an administrating role.

The pricing practices that firms that follow are important from a microeconomic as well as a macroeconomic perspective, indicating the nature and level of competition. These practices also prove to affect the effectiveness of monetary policy. This study engineered a survey approach to better understand the pricing behaviour of firms in the South African retail sector.The survey approach to understanding pricing setting has grown in popularity in recent times, allowing for deeper insights into the mindsets of actual pricing professionals than information offered by micro data studies. Most previous studies have focused on developed countries, while this study deals with a sector of high industry concentration in a developing country with a relatively unstable foreign exchange rate.The results of the study demonstrate that South African retail firms compete primarily with their pricing and quality, and that there is evidence of barometric price leadership. The dominant framework used by firms to set their prices is mark-up pricing.Both price reviews and price changes in South African retail firms were found to be time dependent, and the causes of price changes were asymmetrical depending on the direction of the change. The main driver of price increases was an increase in input costs, while the main driver of price decreases was a reduction in domestic competitor prices.Prices within the South African retail sector were found to be sticky, with the strongest specific cause of firms delaying price adjustments being the maintenance of threshold prices. When considering the reasons for stickiness more broadly as themes, customer relationships are the strongest driver of stickiness, followed by the avoidance of coordination failure. / Dissertation (MBA)--University of Pretoria, 2012. / Gordon Institute of Business Science (GIBS) / unrestricted

The objective of this research is to test the hypothesis that pricing conduct in South Africa, revealed by studies of pricing microdata, can be shown to have an impact on the modeling and conduct of monetary policy. In order to discern stylised facts about pricing conduct in South Africa, use is made of two unique microdata sets, which are the unit level basis of South Africa’s measured CPI and PPI over the period from December 2001 to December 2007. In particular, based on techniques which have been used in comparable studies in other countries, facts have been brought to light concerning inter alia the frequency of price changes, the magnitude of price changes, the duration of prices, heterogeneity in pricing, as well as evidence of seasonality, time-dependence and state-dependence in pricing conduct. In order to understand the implications of such pricing conduct, a basic closed economy theoretical model and thereafter an open economy New Keynesian DSGE model are used to compare the impact of various pricing assumptions. In general, but with some qualification regarding difficulties that arise in comparing pricing microdata with pricing conduct estimated in macro models, it is found that prices are more flexible than those estimated in the open economy DSGE model, implying sharper but less persistent interest rate responses to various shocks. Furthermore, the form of the New Keynesian Phillips curve used in the open economy DSGE model is found to be inconsistent with certain facts revealed through the price microdata.

This dissertation is composed of three essays examining the impact of time varying volatility on firm decision making. The first essay examines the effect of oil price volatility on price setting behavior using Producer Price Index micro data. I analyze whether two measures of price flexibility, price change frequency and dispersion, are affected by changes in oil price volatility. Heterogeneity in oil usage across industries is used to construct industry specific measures of oil price volatility. I find that price changes are more dispersed in high oil usage industries during months with high oil price volatility, however frequency of price change does not change. These results imply that aggregate price level flexibility does not fall during periods of high aggregate volatility. The second essay constructs a state-dependent pricing model with time varying oil price volatility to study if changes in aggregate volatility alter the impulse response of output to monetary policy. Firms use oil as an input to production, while oil price and oil price volatility processes are exogenous. Random menu costs enable the model to match the positive empirical relationship between oil price volatility and price change dispersion. A model simulation examines a counterfactual period of high oil price volatility and implies that increases in aggregate volatility do not substantially reduce the ability of monetary policy to stimulate output. The third essay examines the impact of time varying idiosyncratic uncertainty on investment with multiple types of capital. A model with two types of capital, short-lived equipment and long-lived structures, and nonconvex adjustment costs is constructed to examine the role of economies of scope on investment purchases. Evidence from a structural vector autoregression shows that investment in structures falls four quarters after an uncertainty shock, while investment in equipment falls within one quarter. The model with economies of scope in investment purchases is consistent with these results.

Access to water and sanitation is indeed a human right; however quality water and sanitation service provision should not be assumed a ‘free service’ as a result. Hence it is crucial to understand the costs involved of monopoly water service provision to enable informed decision-making on tariff determination. Namibia, is not only characterised with extreme conditions of water scarcity and skewed income distribution, with a history of free water services, but it also is prone to information asymmetry and lack of transparency (especially financial) challenges in the price-setting process. Hence, the research aim was to adapt a framework for determining price-setting processes and to investigate the potential role of an economic regulator to inform the process and policy accordingly in Namibia. In this regard, the research explores the price-setting processes of independent economic regulators in England and Wales and Zambia (as a guide to understand the dynamics and intricacies of setting and enforcing prices for utilities based on the need for sustainable cost recovery and efficient service provision) to further investigate possible improvements to the Namibian price-setting process. The research objectives were explored through descriptive and exploratory case study approaches, mainly comprising of semi-structured interviews and focus group discussions. The research found that the most appropriate regulatory framework for Namibia is an intermediate framework- a hybrid regulatory body (consisting of a combination between government and independent expert panels). The research also identifies crucial operating principles, regulatory tools (with emphasis on accounting separation within financial models) and consumer involvement as major components for the Namibian price-setting process. In essence, accountability through transparency (effective information sharing and stakeholder involvement) is identified by the study to address the principal-agent challenges faced within Namibia, especially given the extreme conditions.

This thesis places the work of Dr Richard Beeching as Chairman of the British Railways Board in the context of Government policy towards the nationalised railways 1951-64, and examines the popular myth that Beeching and the Minister who appointed him, Ernest Marples, initiated a policy of railway closures and contraction. The thesis argues that Beeching's appointment and policies need to be seen in the context of the failure of Government policy towards the railways during the 1950s. The background to the Transport Act, 1953 is analysed. It is argued that, through this Act, the Government increased competition in the transport field, but was unwilling to accept, and unprepared for, the logical consequences of this change. The discussion of the Government's subsequent policy towards the railways during the 1950s argues that by intervening in industrial relations and price-setting, Ministers not only forced the railways into the red, but hampered their own efforts to encourage the industry to increase its efficiency. Government involvement in industrial relations, price-setting, investment and the withdrawal of unremunerative services is discussed. The Government's tougher approach to railway finances after 1959 (apparent in the 1962 Transport Act, tighter supervision of investment and the closure programme under Beeching) is placed in two contexts. Firstly, the growing recognition within Whitehall that the rise of road transport would limit the railways' future role. Secondly, the reform of the relationship between government and the nationalised industries in general. This discussion leads to a re-evaluation of Marples' significance, and a rejection of the view that Beeching's closure programme arose from a study of the railways in isolation from transport as a whole. Finally, the presentation and implementation of Beeching's closure programme until the 1964 General Election is discussed. The thesis argues that the social and economic consequences of closures were not ignored.

No description available.

[pt] Esta tese incorpora três ensaios acerca de fixação de preços com informação rígida e dispersa (IRD). A estrutura básica mistura o modelo de rigidez de informação proposto em Mankiw and Reis (2002) com o modelo de informação dispersa descrito em Morris and Shin (2002). No capítulo 1, obtémse o equilíbrio do jogo assumindo que as firmas se deparam com complementaridade estratégica em suas decisões de preço. Neste contexto, as firmas tomam suas decisões de preço utilizando a informação disponível para prever os preços das outras firmas e a demanda agregada nominal, o fundamento da nossa economia. Estuda-se a importância de cada parâmetro do modelo em vários contextos. No capítulo 2, estende-se o modelo IRD para analisar como a comunicação do banco central interfere na fixação de preços. Como informação pública ajuda às firmas a prever o estado atual da economia e as ações uma das outras, ela ajuda na sincronia dos preços. Este efeito faz a variância da inflação aumentar com a precisão da informação pública. Além disso, o bem-estar da sociedade é afetado pelo fato de que as firmas tomam suas decisões de preços sem considerar como isto influenciará a decisão das outras firmas. No capítulo 3, utilize-se o modelo com IRD para analisar como a fixação de preços muda quando a taxa de juros, além de ser um instrumento de política capaz de influenciar a dinâmica do fundamento, também é vista como um sinal público que informa a visão da autoridade monetária acerca do estado atual da economia. Sob este arcabouço, firmas utilizam a taxa de juros para embasar suas decisões de preços. Obtêm-se também os parâmetros ótimos do instrumento de política (para três medidas diferentes de bem-estar), considerando-se que o banco central sabe que as firmas extraem informação de suas ações. / [en] This thesis encompasses three essays on price setting under stickydispersed information (SDI). The baseline framework mixes the sticky information model of Mankiw and Reis (2002) with dispersed information models like Morris and Shin (2002) and Angeletos and Pavan (2007). In Chapter 1, we derive the equilibrium of the game assuming that firms face strategic complementarity on their pricing decisions. In this context, firms take their pricing decisions using information to build expectations on the prices set by other firms and on the current state of aggregate nominal demand - the fundamental of the economy. In Chapter 2, we extend the SDI model to analyze how central bank communication affects price setting. As public information help firms to infer the current state of the economy and one another s prices, it improves price synchronization. This effect makes inflation variance increase with the precision of the public information. Social welfare is affected by the fact that firms do not internalize how their prices change other firms pricing decisions. In Chapter 3, we use a SDI model to analyze how price setting changes when the interest rate is a policy instrument that not only partially drives the fundamental dynamics, but also it is understood as a public signal that informs the view of the monetary authority on the current state of the economy. Under this framework, firms use interest rate to support their pricing decisions, influencing inflation dynamics. We also obtain the optimal parameters of the policy instrument (regarding three different efficiency criteria), considering that the central bank knows that firms take information from its actions.

[pt] Este trabalho estima a volatilidade de choques agregados e setoriais, bem como suas contribuições para flutuações econômicas, usando microdados de preços. A ideia central é que inovações setoriais estão associadas com a dinâmica de certas estatísticas, como tamanho médio de reajustes de preços, de um setor econômico específico, enquanto a volatilidade de choques agregados pode ser inferida pela correlação destas estatísticas entre setores diferentes. Portanto, microdados de preços contêm informação sobre a natureza dos ciclos econômicos. Emprega-se aqui um modelo de fixação de preços no qual firmas enfrentam não somente custos de menu, mas também fricções de natureza informacional. O modelo é estimado usando o Método dos Momentos Simulados e dados do Reino Unido. Encontra-se que choques setoriais são consideravelmente mais voláteis que choques agregados. / [en] We estimate the volatility of aggregate and sectoral shocks, as well as their contributions to business cycles fluctuations, using price setting data. The key idea is that sector-specific innovations are associated with the dynamics of price setting statistics, such as average size of price adjustments, within a single economic sector, while the volatility of aggregate disturbances can be inferred from the correlation of these statistics across different sectors. Therefore, price setting data provides useful information about the nature of economic fluctuations. We employ a rich price setting model in which firms face not only menu costs, but also informational frictions and estimate it using Simulated Method of Moments and data from the UK. We find that sectoral shocks are considerably more volatile than their aggregate counterparts.

[pt] Esta tese consiste em três ensaios teóricos sobre tópicos relativos à fixação de preços sob informação incompleta. Duas características são comuns aos três ensaios: (i) informação heterogênea sobre condições econômicas agregadas e (ii) um grau moderado de complementaridade estratégica nas decisões de preços. No Capítulo 1, estuda-se a transmissão de informação em um modelo com estágios de produção e informação dispersa. Firmas observam sinais sobre os preços dos insumos que endogenizam a precisão da informação que é pública dentro de um estágio, mas não entre os estágios. Em contraste com o caso com sinal público exógeno, as firmas decidem otimamente atribuir menos peso a informação pública ao longo da cadeia. Uma implicação é que a precisão da informação, que ficaria inalterada com sinais públicos exógenos, decresce ao longo da cadeia com sinais semi-públicos endógenos. No Capítulo 2, examinase o processo de repasse cambial (ERPT) para os preços em um modelo de informação dispersa onde a taxa de câmbio nominal fornece informação sobre os fundamentos de forma imperfeita. Quando a informação é completa, ERPT também é completa. Sob informação dispersa, o modelo apresenta três propriedades consistentes com os fatos estilizados de ERPT. Primeiro, ERPT está entre 0 e 1. Segundo, ERPT é normalmente maior para produtos importados do que para produtos ao consumidor. Terceiro, ERPT é maior para economias emergente e diminuiu ao longo do tempo tanto para economias industrializadas quanto emergentes. Finalmente, no Capítulo 3, estuda-se a interação entre rigidez e dispersão de informação através da introdução de sinais com ruído em um modelo padrão de curva de Phillips com rigidez de informação. O modelo de informação rígida e dispersa (SDI) resultante apresenta como casos particulares os modelos de informação completa, dispersa e rígida. Estuda-se a relevância individual dos principais parâmetros do modelo em várias direções. Primeiro, analisa-se o impacto dos valores corrente e passados da inflação com informação completa na inflação corrente. Segundo, consideram-se as respostas da inflação a choques monetários. Finalmente, compara-se a variância da inflação SDI com as variâncias da inflação quando a informação é completa, dispersa ou rígida. / [en] This thesis consists of three theoretical essays on topics in price setting under imperfect information. Unifying the essays are two features: (i) heterogeneous information about aggregate economic conditions and (ii) a moderate degree of complementarity in pricing decisions. In Chapter 1, the transmission of information is studied in a model with a vertical input-output structure and dispersed information. Firms observe input prices with noise that endogenize the precision of information that is public within a stage but not across stages. In contrast to the case with an exogenous and overall public signal, firms find it optimal to rely less on public information along the chain. A direct implication is that, while information precision remains unchanged with exogenous public signals, it decreases along the chain when semi-public signals are endogenous. In Chapter 2, exchange-rate pass-through (ERPT) to prices is examined in a model of dispersed information where the nominal exchange rate imperfectly conveys information about the underlying fundamentals. If the information is complete, ERPT is also complete. Under dispersed information, the model displays three properties that are consistent with the stylized facts of passthrough. First, ERPT lies between 0 and 1. Second, ERPT is usually higher for imported goods prices than for consumer prices. Third, ERPT is higher for emerging market countries and declines over time for both industrial and emerging market economies. Finally, in Chapter 3, the interaction between information stickiness and dispersion is studied by introducing noisy signals in an otherwise standard sticky-information Phillips curve. The model of stickydispersed information (SDI) nests as special cases the complete information, the dispersed information and the sticky information models. The individual relevance of each of the main parameters of the model is studied in several directions. First, the impact of current and past complete-information inflation rates on current inflation is analyzed. Second, the inflation response to monetary shocks is considered. Finally, the variance of SDI inflation is compared with the variances of complete, dispersed, or sticky-information inflations.