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We consider the question of whether, and in what sense, Wardrop equilibria provide a good approximation for Nash equilibria in atomic unsplittable congestion games with a large number of small players. We examine two different definitions of small players. In the first setting, we consider games where each player's weight is small. We prove that when the number of players goes to infinity and their weights to zero, the random flows in all (mixed) Nash equilibria for the finite games converge in distribution to the set of Wardrop equilibria of the corresponding nonatomic limit game. In the second setting, we consider an increasing number of players with a unit weight that participate in the game with a decreasingly small probability. In this case, the Nash equilibrium flows converge in total variation towards Poisson random variables whose expected values are Wardrop equilibria of a different nonatomic game with suitably-defined costs. The latter can be viewed as symmetric equilibria in a Poisson game in the sense of Myerson, establishing a plausible connection between the Wardrop model for routing games and the stochastic fluctuations observed in real traffic. In both settings we provide explicit approximation bounds, and we study the convergence of the price of anarchy. Beyond the case of congestion games, we prove a general result on the convergence of large games with random players towards Poisson games., Mathematics of Operations Research, Forthcoming, 2022

In the context of the debate on Exchange Rate Pass-Through (ERPT) under inflation targeting regimes, this study analysis the ERPT in inflation targeting and non-targeting economies of ASEAN-5. Employing a Non-linear Autoregressive Distributed Lag (N-ARDL) framework on data from 2000: Q1 to 2019 Q:4, our key empirical findings suggest that the exchange rate shocks do lead to significant changes in inflation. There is also prima facie evidence of asymmetric effects of exchange rate shocks in Singapore, Philippines, and Indonesia and the results varied between and among inflation targeting and non-targeting countries. The results also varied in the short and long-terms, whereas in the long-run, asymmetric effects of real exchange rate persist only for Indonesia and Singapore. Regardless of the inflation targeting or non-targeting regime, oil price shocks are found to be the most crucial factor with the largest impact on inflation in ASEAN-5 economies. Money supply and output growth also found to have some effect on inflation, though the results varied among countries. Our findings have profound implication for monetary policy formulation and price stability.

Ensuring aggregate food price stability requires a forward-looking assessment of the risk that unexpected deviations in individual food items’ inflation lead to large shocks in the aggregate food price inflation. To do so, we propose using a multivariate GARCH framework in combination with the Euler method to (1) estimate the conditional standard deviation and quantiles of the food price inflation shocks and (2) attribute the total risk to the underlying food items. For the FAO food price index, we find that even though meat inflation systematically has the highest weight in the aggregate index, cereal inflation is the main contributor to the total food price inflation risk over the period 1990–2018. The use of time series models and the Cornish-Fisher expansion make the risk characterization forward-looking and a potentially helpful tool for risk management.

Does monetary policy react systematically to macroeconomic innovations? In a sample of 16 countries – operating under various monetary regimes – we find that monetary policy decisions, as expressed in yield curve movements, do react to macroeconomic innovations and these reactions reflect the monetary policy regime. While we find evidence of the primacy of the price stability objective in the inflation targeting countries, links to inflation and the output gap are generally weaker and less systematic in money-targeting and multiple-objective countries.

The price of anarchy and price of stability are two well-studied performance metrics that seek to characterize the inefficiency of equilibria in distributed systems. The distinction between these two performance metrics centers on the equilibria that they focus on: the price of anarchy characterizes the quality of the worst-performing equilibria, while the price of stability characterizes the quality of the best-performing equilibria. While much of the literature focuses on these metrics from an analysis perspective, in this work we consider these performance metrics from a design perspective. Specifically, we focus on the setting where a system operator is tasked with designing local agent utility functions to optimize these performance metrics in a class of games termed covering games. Our main result characterizes a fundamental trade-off between the price of anarchy and price of stability in the form of a fully explicit Pareto frontier. Within this setup, we observe that optimizing the price of anarchy comes directly at the expense of the price of stability (and vice versa). Our second result demonstrates how a system-operator could incorporate an additional piece of system-le

We examine the time-varying causal link between monetary policies and macroeconomy, macroprudential policies and financial stability in China. We find that expansionary monetary policy leads to output growth, tightening monetary policy leads to price stability, and tightening quantitative monetary policy or expanding price-based monetary policy is effective in maintaining financial stability. In response to stagnation or deflation, the central bank implements an expansionary monetary policy. To prevent financial turbulence, the central bank pursues an expansionary quantitative monetary policy or a tight price-based monetary policy. In addition, macroprudential policy should be used in conjunction with monetary policy to maintain financial stability.

This speech highlights two channels through which globalization poses challenges for monetary policy. The first channel is through the global determination of the average world natural real rate of interest, which implies that saving and investment shifts abroad can influence the domestic interest rate setting consistent with price stability. The second channel is through global digital payments systems, which may compromise domestic policy sovereignty through effects on both monetary and financial stability.

The introduction of the internet as a sales channel has pressed hotel companies to adopt new pricing policies, most notably revenue management (RM). These techniques have been heralded as an essential requirement for hotel companies to maximise profits. The present study, however, will show that this claim is not realistic for a leading, highly competitive destination like Ibiza. The analysis finds that there is strong price stability and that only a few hotels use RM. It is common, however, to find qualitative RM that involves removing cheaper room types and room-and-board options from the available offering when demand is high.

This paper investigates the relationship between changes in euro area short-term and long-term market-based inflation expectations from January 2005 to September 2018, also devoting special attention to the relevance of the oil market. The full sample is split into three subsets related to different economic and financial landscapes. To model the conditional mean and the variance–covariance structure, a VAR-CCC-GARCH specification with oil effects in the volatility proves to be a preferable approach compared to other multivariate GARCH models. In general, the conditional correlation between changes in short-term and long-term inflation compensation appears as constant and relatively low in each subset, though increasing since mid-2014. Furthermore, there are no signs of fundamental deviations in how changes in short-term inflation expectations affect changes in longer-term expectations and vice versa. There is evidence that changes in short-term inflation expectations tend to respond to the movements of oil prices over time, while changes in longer-term ones started responding to crude dynamics after mid-2008. On the whole, these findings are relevant for analysts, investors and especially for the policymakers who charged with ensuring price stability. info:eu-repo/semantics/publishedVersion

Emerging on-demand sharing alternatives, in which one resource is utilised simultaneously by a circumstantial group of users, entail several challenges regarding how to coordinate such users. A very relevant case refers to how to form groups in a mobility system that offers shared rides, and how to split the costs within the travellers of a group. These are non-trivial tasks, as two objectives conflict: 1) minimising the total costs of the system, and 2) finding an equilibrium where each user is content with her assignment. Aligning both objectives is challenging, as users are not aware of the externalities induced to the rest. In this paper, we propose protocols to share the costs within a ride so that optimal solutions can also constitute equilibria. To do this, we model the situation as a non-cooperative game, which can be seen as a game-version of the well-known set cover problem. We show that the traditional notions of equilibrium in game theory (Nash and Strong) are not useful here, and prove that determining whether a Strong Equilibrium exists is an NP-Complete problem, by reducing it to the k-Exact-Cover problem. Hence, we propose three alternative equilibrium notions (stronger than Nash and weaker than Strong), depending on how users can coordinate. For each of these equilibrium notions, we propose a (possibly overcharging) cost-sharing protocol that yields the optimal solutions equilibria. Simulations for Amsterdam reveal that our protocols can achieve stable solutions that are close to the optimum, and that having a central coordinator can have a large impact.

Schelling’s famous model of segregation assumes agents of different types, who would like to be located in neighborhoods having at least a certain fraction of agents of the same type. We consider natural generalizations that allow for the possibility of agents being tolerant towards other agents, even if they are not of the same type. In particular, we consider an ordering of the types, and make the realistic assumption that the agents are in principle more tolerant towards agents of types that are closer to their own according to the ordering. Based on this, we study the strategic games induced when the agents aim to maximize their utility, for a variety of tolerance levels. We provide a collection of results about the existence of equilibria, and their quality in terms of social welfare., LIPIcs, Vol. 241, 47th International Symposium on Mathematical Foundations of Computer Science (MFCS 2022), pages 60:1-60:14

Modeling how agents form their opinions is of paramount importance for designing marketing and electoral campaigns. In this work, we present a new framework for opinion formation which generalizes the well-known Friedkin-Johnsen model by incorporating three important features: (i) social group membership, that limits the amount of influence that people not belonging to the same group may lead on a given agent; (ii) both attraction among friends, and repulsion among enemies; (iii) different strengths of influence lead from different people on a given agent, even if the social relationships among them are the same. We show that, despite its generality, our model always admits a pure Nash equilibrium which, under opportune mild conditions, is even unique. Next, we analyze the performances of these equilibria with respect to a social objective function defined as a convex combination, parametrized by a value λ ∈ [0, 1], of the costs yielded by the untruthfulness of the declared opinions and the total cost of social pressure. We prove bounds on both the price of anarchy and the price of stability which show that, for not-too-extreme values of λ, performance at equilibrium are very close to optimal ones. For instance, in several interesting scenarios, the prices of anarchy and stability are both equal to (Equation presented) which never exceeds 2 for λ ∈ [1/5, 1/2].

This paper studies the effects of the exchange rate regime of the Mexican economy on how the oil price shocks affect the domestic economic performance by considering the period from January 1992 to December 2019. The empirical evidence reported here reveals that a positive oil price shock appreciates the local currency, increases interest rates, output, and prices. However, once the exchange rate channel is closed, the interest rate increases, and prices will be higher. However, we could not find any statistically significant evidence of the effect on output changes with the exchange rate regime. Thus, the flexible exchange rate regime may promote price stability when the Mexican economy faces an oil price shock.

We present positive evidence of price stability of cryptocurrencies as a medium of exchange. For the sample years from 2016 to 2020, the prices of major cryptocurrencies are found to be stable, relative to major financial assets. Specifically, after filtering out the less-than-one-month cycles, we investigate the daily returns in US dollars of the major cryptocurrencies (i.e., Bitcoin, Ethereum, and Ripple) as well as their comparators (i.e., major legal tenders, the Euro and Japanese yen, and the major stock indexes, S&P 500 and MSCI World Index). We examine the stability of the filtered daily returns using three different measures. First, the Pearson correlations increased in later years in our sample. Second, based on the dynamic time-warping method that allows lags and leads in relations, the similarities in the daily returns of cryptocurrencies with their comparators have been present even since 2016. Third, we check whether the cumulative sum of errors to predict cryptocurrency prices, assuming stable relations with comparators' daily returns, does not exceeds the bounds implied by the Black-Scholes model. This test, in other words, does not reject the efficient market hypothesis., 127 pages

This study investigates the main sources of recent inflationary pressures from 1999Q1 to 2019Q4 using linear and non-linear Auto-Regressive Distributed Lag (ARDL) Models. It also examines the pass-through effects and causality between food and non-food prices using Dynamic Ordinary Least Square (DOLS) estimation and Toda-Yamamoto Granger Causality approach. The main findings of this study indicate that inflation expectation, money supply growth, world food price, real income, and food supply are found as the main short-run and long-run drivers of food inflation. While, non-food inflation appears to be mainly explained by expected inflation, exchange rate, administered price, and world non-food price level. The results further reveal that exchange rate, real income, world price, and food supply have asymmetric effects on the overall inflationary process. On the other hand, evidence of second-round effects between food and non-food prices is confirmed although a strong and long-lasting effect comes from food prices. The Granger causality test results also support a two-way causality between the two price groups. After all, this study suggests considering the specific behaviors and sources of food and non-food prices, as well as the transmission effects between them so as to effectively control the underlying inflationary shocks and maintain price stability in the economy., Food inflation, Non-food inflation, Pass-through effects, Non-linear ARDL, Ethiopia.

Optimization of the transmission power and rate allocation is a significant problem in wireless networks with mobile nodes. Due to mobility, the vehicles establishing wireless networks may exhibit severe fluctuations of their link quality, affecting their connection reliability and throughput. In Vehicular Ad-hoc Networks (VANETS), the IEEE 802.11p standard provides a practical metric for the Packet Reception Ratio (PRR), which is related with the transmission power and rate. Finding a global strategy for optimizing PRR for all mobile nodes can be treated as a potential game where each vehicle is considered as a selfish player, aiming to maximise its transmission reliability while rate constraints are satisfied. To this end, we propose a game-theoretic approach that converges to a Nash equilibrium. The main contributions of this work include: (i) identification of the best case equilibrium, for two cases of interference: diminished or kept stable, and (ii) verification of the equilibrium optimality, by showing that the value of stability is 1. Moreover, numerical results exhibiting the ease of the utility function calculation are provided, especially after an SINR level, whereby the utility function is concave and can be solved efficiently in polynomial time.

We empirically show that the auction IPO share price is the equilibrium outcome of a sequential game between promoters and institutional investors. In this game, promoters’ utility for information production and their utility for price stability are higher (lower) than their utility for IPO proceeds when they retain a large (small) fraction of the firm’s equity. Conversely, institutional investors always produce information and their utility for underpricing, which is inversely related to return volatility, is higher (lower) in lottery (pro-rata) IPOs. The findings provide new evidence on the economic roles of promoters and institutional investors in the auction IPO market.

The study explores the symmetric and asymmetric impact of economic policy uncertainty (EPU) on food prices in China for the period from 1998M1 to 2020M5. The linear Autoregressive Distributive Lag (ARDL) framework is used to evaluate the symmetric effect. However, the nonlinear Autoregressive Distributive Lag (NARDL) model is employed to gauge the asymmetric impact of the EPU on food prices in the short run and in the long run. According to ARDL results, an increase in EPU leads to a significant increase in food prices both in the long run and in the short run. In NARDL short run results, the Wald test statistic confirms the presence of asymmetry. It is found that negative EPU shocks have a positive and significant effect on food prices, while positive shocks have a negative but insignificant impact. In the long run, the Wald test for asymmetry shows that there is no evidence of asymmetry. Also, the impact of positive and negative EPU shocks is insignificant. The dynamic multiplier graph for NARDL shows the adjustment of asymmetry after negative and positive shocks towards long-run equilibrium. The overall impression is that negative shocks of uncertainty have a deeper effect than positive shocks on food prices in China. The overall analysis shows that EPU shocks have an asymmetric impact as they are sudden, unforeseen and disrupt food price stability in the short-run only. Yet it will shift towards equilibrium again in the long-run.

Strong evidence exists that price/wage durations are dependent on the state of the economy, especially inflation. We embed this dependence in a macro model of the US that otherwise does well in matching the economy’s behaviour in the last three decades; it now also matches it over the whole post-war period. This finding implies a major new role for monetary policy: besides controlling inflation it now determines the economy’s price stickiness. We find that, when backed by fiscal policy in preventing a ZLB, by targeting nominal GDP monetary policy can achieve high price stability and avoid large cyclical output fluctuations.

To examine the role of ECB communication at press conferences, we estimate non-linear empirical reaction functions for the ECB's monetary policy decisions during the first two decades of monetary union and augment them with communication indicators on the risks to price stability and to growth. Overall, we find that the ECB's risk assessments at press conferences provided reliable orientation to observers concerning future policy decisions. Communication about the risks to inflation and to growth was more relevant for explaining future policy changes than the staff projections themselves. We also show that the ECB responded to risks to price stability in line with its primary objective and that its reaction function evolved after the global financial crisis, when money (or credit) growth lost its significance as a driver of the policy response. Our findings add to the understanding of the ECB's reaction function and the role of communication therein.