There are strong incentives to delay or accelerate investment to take advantage of predictable changes in after-tax prices. For sufficiently long-lived capital goods, these incentives are so strong that the intertemporal elasticity of investment demand is nearly infinite. For temporary tax changes, the equilibrium shadow price of long-lived capital goods should fully reflect the tax subsidy reg...

Temporary price reductions (sales) are common for many goods and naturally result in large increase in the quantity sold. In previous work we found that the data support the hypothesis that these increases are, at least partly, due to dynamic consumer behavior: at low prices consumers stockpile for future consumption. In this paper we quantify the magnitude of the effect and derive the quantita...

Price and Income Elasticities Estimated From BLS Consumer Expenditure Surveys and ACCRA Price Data Lester D. Taylor University of Arizona* This paper represents a low-key effort to estimate both price and income elasticities for several broad categories of expenditure from cross-sectional data sets that combine price information collected by ACCRA with the BLS Consumer Expenditure Surveys. Sixt...

This paper analyzes the potential effect of global market competition on inflation dynamics. It does so through the lens of the Calvo model of staggered price setting, which implies that inflation depends on expected future inflation and a measure of marginal costs. I modify the assumption of a constant elasticity of demand, standard in this model, to provide a channel through which an increase...

This paper investigates the effects of changes in prices and wages, which may be caused by trade liberalization, on the micro behavior of farmers, in particular, on the use of agrochemicals and parttime farming. I demonstrate that a small decrease in the price of an agricultural product decreases the use of agrochemicals if there are no arable land rental transactions. On the other hand, if a c...

Conceptually, inflation is best understood as on-going erosion of the purchasing power of money. Consumer price inflation is generally measured as changes in the weighted average of the money prices of a basket of selected goods and services. This raises questions concerning the choice of goods and services which constitute that basket, what sort of price changes should be counted as part of th...

We consider a duopoly industry with two separate firms each selling an indivisible product. The joint consumption of these goods has a specific value for the consumers which exceeds the mere addition of utilities when products are consumed in isolation: the higher this excess, the larger the complementarity between the goods. We analyse price equilibria in this market as related to the degree o...