The digital revolution of pricing enables retailers to change their prices more frequently than ever before. While the industry endorses this development, critics fear it could foster excessive price fluctuations. This paper studies price fluctuations in the context of brick-and-mortar retailing...

During the Great Moderation, macroeconomic volatility declined while firm markups increased. We document a causal relationship between volatility and markups due to tacit collusion. We exploit the legalisation of interstate banking as an exogenous decrease in volatility. Using an instrumental...

In this paper, we study a new channel to explain firms' price setting behavior. We propose that uncertainty about factor prices has a positive effect on markups. We show theoretically that firms with higher shares of inputs with volatile prices set higher markups. We use the Bartik shift-share...

We study dynamic signaling in a game of stochastically evolving stakes. Our motivating example is dynamic limit pricing in markets with persistent demand shocks. An incumbent is privately informed about its costs, high or low, and can deter a potential entrant by setting prices strategically....

We examine day-trading activities for 540 stocks traded on the Korea Stock Exchange using transactions data for the period from 1999 to 2000. Our cross-sectional analysis reveals that day-traders prefer lower-priced, more liquid, and more volatile stocks. By estimating various bivariate VAR...

The current research assesses the risks commonly attributed to the presence of HFT in the context of different market structures deployed by the U.S. exchanges. In particular, we find that, by design, the so-called “normal” exchanges have the lowest market quality, including the highest...

Commodity markets are characterized by large volumes of forward contracts as well as high volatility. They are often accused of weak competitive pressure. This article extends the existing literature by analyzing tacit collusion of firms, forward trading and volatility simultaneously. The...

I model the optimal semi-collusive strategy of firms using forward contracts in volatile markets. It has been shown that forward contracts can be used to stabilize a collusive agreement under deterministic (Liski and Montero, 2006) as well as under stochastic market conditions (Aichele, 2012)....

Output-based allocations (OBAs) are typically used in emission trading schemes to mitigate leakage in sectors at risk. Recent work has shown they may also help to stabilize prices in markets subject to supply and demand shocks. We extend previous work to simultaneously include both leakage and...