EconAir

      INTRODUCTION – COMPANIES WITH “MARKET POWER”   The focus of this essay is on corporations that sell products or services to final consumers. A common strategy is price discrimination.   Retailing is somewhat different than most market transactions. Retailers sell to a large number of consumers. They negotiate prices and terms of sales with a wide variety of suppliers, both in size and products offered.   Retailers and distributors are market-makers. They bring buyers (consumers) and sellers (manufacturers) together. Some companies have their own bricks-and-mortar stores (Sherwin-Williams) or their own websites. Many online retail sites such as Amazon are market-makers.   This discussion assumes that sellers and retailers have “market power.” This may be a result of past strategies of branding, advertising, developing loyal or return customers, developing market niches by product line extension, or any other strategy that differentiates its produc...

THE ECONOMICS OF FINANCIAL MARKETS MARKET-MAKERS, BIASED INFORMATION, AND FORECASTS This tutorial will look at financial markets and how they actually function.  There are two general theories about how financial markets work. The first is the Efficient Market Theory, which assumes all decision-makers are rational – they have access to information, can analyze it, and make investment decisions. Strangely, a major conclusion is that investors cannot predict stock price movements, which are random. The second is Behavioral Finance, which assumes that investors are irrational – they have a number of biases and are influenced by the markets’ past behavior. Both theories based on this supposed distinction that “explain” financial price behavior are irrelevant. What is left out of theoretical models of financial markets is how financial markets actually operate. Between buyers (investors) and sellers (including issuers of new securities), there are market makers like brokerage firms, man...