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. Orientation discrimination in WS 2
2. Analyzing the Agricultural Trade Impacts of the Canada-Chile Free Trade Agreement
3. Spectral density bandwith choice and prewightening in the estimation of heteroskadasticity and autocorrelation consistent covariance matrices in panel data models
4. The name is absent
5. The name is absent
6. The name is absent
7. LOCAL CONTROL AND IMPROVEMENT OF COMMUNITY SERVICE
8. SOME ISSUES IN LAND TENURE, OWNERSHIP AND CONTROL IN DISPERSED VS. CONCENTRATED AGRICULTURE
9. The name is absent
10. DISCRIMINATORY APPROACH TO AUDITORY STIMULI IN GUINEA FOWL (NUMIDA MELEAGRIS) AFTER HYPERSTRIATAL∕HIPPOCAMP- AL BRAIN DAMAGE