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Abstract

This paper analyzes the role of seller-induced shortage as a signal of quality. Unlike dissipative advertising, the cost of inducing shortage is different for different quality types. It is shown that under certain conditions, a high-quality monopoly firm that signals quality by inducing shortage makes more profit than using price alone or combined with dissipative advertising. This is because the forgone profit from the lost sales is always lower for the high-quality firm than for the lowquality firm. The result explains why high-quality firms may prefer to initially limit supply with a price weakly lower than that in the complete-information case.

Abstract

A multi-regional dynamic computable general equilibrium model is constructed in this paper to explore the macroeconomic effects of international oil price shocks and RMB exchange rate changes on China. The results show that (1) in terms of regional development differences, the decrease in international oil prices and depreciation of RMB are both conducive to economic growth, although the impact of RMB devaluation is more obvious. Increases in international oil prices will further widen the output gap between the rich and the poor regions, whereas oil price decreases and RMB devaluation will narrow the regional development differences. (2) In terms of employment, the depreciation of the exchange rate and the decline in international oil prices will help increase the employment rate in most regions, but oil price hikes will be most beneficial for improving oil industry employment in the northeast. (3) The impact of oil price volatility is asymmetric. Compared with rising oil prices, falling oil prices have significantly greater effects on GDP, industrial output, employment and other aspects. Furthermore, the impacts of exchange rate fluctuations and oil price changes on the regional economy exhibit a time lag.