Abstract
Bitcoin provides its users with transaction-processing services which are similar to those of traditional payment systems. This article models the novel economic structure implied by ...Bitcoin’s innovative decentralized design, which allows the payment system to be reliably operated by unrelated parties called miners. We find that this decentralized design protects users from monopoly pricing. Competition among service providers within the platform and free entry imply no entity can profitably affect the level of fees paid by users. Instead, a market for transaction-processing determines the fees users pay to gain priority and avoid transaction-processing delays. The article (i) derives closed-form formulas of the fees and waiting times and studies their properties, (ii) compares pricing under the Bitcoin Payment System to that under a traditional payment system operated by a profit-maximizing firm, and (iii) suggests protocol design modifications to enhance the platform’s efficiency. The Appendix describes and explains the main attributes of Bitcoin and the underlying blockchain technology.
Uniform Pricing in U.S. Retail Chains DellaVigna, Stefano; Gentzkow, Matthew
The Quarterly journal of economics,
11/2019, Letnik:
134, Številka:
4
Journal Article
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Abstract
We show that most U.S. food, drugstore, and mass-merchandise chains charge nearly uniform prices across stores, despite wide variation in consumer demographics and competition. Demand ...estimates reveal substantial within-chain variation in price elasticities and suggest that the median chain sacrifices ${\$}$16 million of annual profit relative to a benchmark of optimal prices. In contrast, differences in average prices between chains are broadly consistent with the optimal benchmark. We discuss a range of explanations for nearly uniform pricing, highlighting managerial inertia and brand image concerns as mechanisms frequently mentioned by industry participants. Relative to our optimal benchmark, uniform pricing may significantly increase the prices paid by poorer households relative to the rich, dampen the response of prices to local economic shocks, alter the analysis of mergers in antitrust, and shift the incidence of intranational trade costs.
We consider dynamic pricing competition between two firms offering vertically differentiated products to strategic customers who are intertemporal utility maximizers. We show that price skimming ...arises as the unique pure-strategy Markov perfect equilibrium in the game under a simple condition. Our results highlight the asymmetric effect of strategic customer behavior on quality-differentiated firms. Even though the profit of either firm decreases as customers become more strategic, the low-quality firm suffers substantially more than the high-quality firm. Furthermore, we show that unilateral commitment to static pricing by either firm generally improves profits of both firms. Interestingly, both firms enjoy higher profit lifts when the high-quality firm commits rather than when the low-quality firm commits.
This paper was accepted by Yossi Aviv, operations management.
The paper investigates the proprieties of Bitcoin in the financial markets. Specifically, we explore the conditional cross effects and volatility spillover between Bitcoin and financial indicators ...using different multivariate GARCH specifications. The nature of interaction between Bitcoin and financial variables and their transmission mechanisms are taken into account when analyzing the diversification and hedging effectiveness across gold asset and stock market. Our findings suggest that all models confirm the significant returns and volatility spillovers. More importantly, we find that VARMA (1,1)-DCC-GJR-GARCH is the best-fit model for modeling the joint dynamics of a variety of financial assets. We also show that a short position in the Bitcoin market allows hedging the risk investment for all different financial assets. Finally, hedging strategies involving gold, oil, equities and Bitcoin reduce considerably the portfolio's risk, as compared to the risk of the portfolio made up of gold, oil and equities only.
•Cryptocurrencies represent such an alternative because of their high average return and low correlation with financial assets.•Hedging strategies involving gold, oil, emerging stock markets and Bitcoin reduce considerably a portfolio’s risk, as compared to the risk of a portfolio composed of gold, oil and stocks from emerging stock only.
Risks and Returns of Cryptocurrency Liu, Yukun; Tsyvinski, Aleh
The Review of financial studies,
06/2021, Letnik:
34, Številka:
6
Journal Article
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Abstract
We establish that cryptocurrency returns are driven and can be predicted by factors that are specific to cryptocurrency markets. Cryptocurrency returns are exposed to cryptocurrency network ...factors but not cryptocurrency production factors. We construct the network factors to capture the user adoption of cryptocurrencies and the production factors to proxy for the costs of cryptocurrency production. Moreover, there is a strong time-series momentum effect, and proxies for investor attention strongly forecast future cryptocurrency returns.
This paper addresses the timely question of whether Bitcoin exhibits a safe-haven property for stock market investments during extreme market conditions and whether such a property is similar to or ...different from that of gold and the general commodity index. We propose a new definition of a weak and strong safe-haven within a bivariate cross-quantilogram approach. This definition considers the lowest tails of both the safe-haven asset and the stock index. Our sample period spans from 19 July 2010 until 22 February 2018 and focuses on several stock market indices, including those of the US, China, and other developed and emerging economies. Our main results show that, at best, each of Bitcoin, gold, and the commodity index can be considered as a weak safe-haven asset in some cases. Rolling-window predictability analyses generally confirm those results and reveal that the safe-haven roles of Bitcoin, gold, and commodities are time-varying and differ across the stock market indices under study.
•Study the role of Bitcoin, gold and commodities for stock indices•Propose a definition of weak/strong safe-haven within a cross-quantilogram approach•Consider the lowest tails of both the safe-haven asset and the stock index•Bitcoin, gold, and the commodity index are weak safe-havens in some cases•Rolling-window analyses reveal evidence of time-variation in the safe-haven roles.
Data pricing plays a pivotal role in fostering the growth of data markets, enhancing the efficiency of data utilization, and realizing the full potential of data value. Nevertheless, the intricate ...nature and specificity of data assets render accurate pricing a formidable challenge. To tackle this challenge, we adopt the “divide and conquer” approach and introduce a heterogeneous ensemble pricing model grounded in clustering strategies to enhance the precision of data asset pricing. Initially, our study generates 15 diverse pricing models as potential candidates, leveraging clustering strategies to achieve an adaptive aggregation of data assets. Notably, we introduce an innovative weight generation strategy based on the concept of universal gravitational force to integrate the pricing results. To validate the effectiveness of our Heterogeneous Clustering Ensemble Gravity-based pricing model (HCEG), we conduct computational experiments on transaction platform data assets. The results unequivocally demonstrate the superiority of the proposed HCEG pricing model in data asset pricing. Furthermore, our study delves deeper into the impact of clustering centers, feature selection, and integration strategies on the performance of the pricing model. This comprehensive analysis provides valuable insights for optimizing and enhancing the precision of data asset pricing.
Cryptocurrency markets exhibit periods of large, recurrent arbitrage opportunities across exchanges. These price deviations are much larger across than within countries, and smaller between ...cryptocurrencies, highlighting the importance of capital controls for the movement of arbitrage capital. Price deviations across countries co-move and open up in times of large bitcoin appreciation. Countries with higher bitcoin premia over the US bitcoin price see widening arbitrage deviations when bitcoin appreciates. Finally, we decompose signed volume on each exchange into a common and an idiosyncratic component. The common component explains 80% of bitcoin returns. The idiosyncratic components help explain arbitrage spreads between exchanges.
In this paper, we develop an equilibrium asset pricing model for market excess returns, variance and the third cumulant by using a jump‐diffusion process with stochastic variance and jump intensity ...in Cox et al. (1985) production economy. Empirical evidence with the S&P 500 index and options from January, 1996 to December, 2005 strongly supports our model prediction that the lower the third cumulant, the higher the market excess returns. Consistent with existing literature, the theoretical mean–variance relation is supported only by regressions on risk‐neutral variance. We further demonstrate empirically that the third cumulant explains significantly the variance risk premium.
I identify a “slope” factor in the cross section of commodity futures returns: high-basis commodity futures have higher loadings on this factor than low-basis commodity futures. Combined with a level ...factor (an index of commodity futures), this slope factor explains most of the average excess returns of commodity futures portfolios sorted by basis. More importantly, I find that this factor is significantly correlated with investment shocks, which represent the technological progress in producing new capital. I investigate a competitive dynamic equilibrium model of commodity production to endogenize this correlation. The model reproduces the cross-sectional futures returns and many asset pricing tests.
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