Dual Track Reforms: With and Without Losers



Figure 1: First period strategic demand and supply in a closed economy

derived from these inter-temporal arbitrage activities. As the figure shows, the strategic
demand rotates around the (non-strategic) demand
D at the second period equilibrium price
in the market track which, according to Lemma 1, is equal to
Pe. Similarly, the strategic
supply rotates around the (non-strategic) supply
S at Pe. To understand how S0 and D0 are
derived, let us consider the buyers’ decision (the problem faced by the producers is similar),
starting with the case in which a buyer’s marginal willingness to pay (
MV) is higher than
P e . From Lemma 1, we know that he will always consume in the second period. If he enters
a transaction in the first period, his total payoff for the two periods will be

(1 + δ)(MV - P).

given that he is locked into the first period price P . If he does not enter a transaction in
the first period, he will be able to trade in the market track at the price
Pe in the second
period. Thus his total payoff will be

δ(MV - Pe).

The buyer is indifferent about whether or not to carry out a transaction in the first period



More intriguing information

1. AN ECONOMIC EVALUATION OF COTTON AND PEANUT RESEARCH IN SOUTHEASTERN UNITED STATES
2. Factores de alteração da composição da Despesa Pública: o caso norte-americano
3. Aktive Klienten - Aktive Politik? (Wie) Läßt sich dauerhafte Unabhängigkeit von Sozialhilfe erreichen? Ein Literaturbericht
4. Declining Discount Rates: Evidence from the UK
5. WP RR 17 - Industrial relations in the transport sector in the Netherlands
6. Reform of the EU Sugar Regime: Impacts on Sugar Production in Ireland
7. The name is absent
8. The name is absent
9. A THEORETICAL FRAMEWORK FOR EVALUATING SOCIAL WELFARE EFFECTS OF NEW AGRICULTURAL TECHNOLOGY
10. An Efficient Secure Multimodal Biometric Fusion Using Palmprint and Face Image