Patronage concentration; firms.

Sunday, April 13th, 2008

Patronage concentration is a term used in marketing. It is the share of an individual consumer’s expenditures in an industry that is spent at one company. It is the amount that a person spends at one company divided by the amount that person spends at all companies in the industry.

amount spent at one company
___________________________________
amount spent at all companies in the industry

The amount a person spends at one company is sometimes called the “relationship revenue”.

For example, I may spend $1000 per year at fast food restaurants. If I spend $100 at Wendy’s Restaurants, then Wendy’s has (100/1000=10%) ten percent of my patronage. As long as the amount spent at one firm is less than the total amount spent at all firms in the industry, the customer will be patronizing more than one firm, and patronage concentration will be less than 100%.

The goal of many firms is to increase the patronage concentration ratio of its customers to 100% (that is make it an exclusive relationship). Some firms set different patronage concentration targets for various classes of customers. This reflects the fact that some types of customers are more profitable than others.

This is very similar to market share. Whereas market share describes the percentage of all customers that patronize a company relative to the industry total, the patronage concentration ratio describes the percentage of one customer’s patronage going to a company, relative to that persons spend in the industry. That is, market share is the aggregate or macro version of the patronage concentration ratio. Or alternatively, patronage concentration is the micro equivalent of market share.


See also

  • loyalty business model
  • personalized marketing
  • relationship marketing

Family-friendliness; and thus imply

Sunday, April 13th, 2008

Entertainment or information is called “family friendly” if it considered suitable for the whole family. In particular it means that it is not considered harmful for children, which may imply restrictions on nudity, sex, violence, horror, crude language, etc.

The concept of “family friendly” entertainment or information, or of the media carrying them being so, is an aspect of the family values controversy in American political and social discourse. The moral connotations the concept and terms are used with varies greatly with speaker, and a single speaker may often use them differently privately and publicly.

In arriving at specific consumer decisions, moral connotations of the terms may be secondary or absent, and the denotation may be mainly distinctions about content that are less detailed than entertainment rating systems, rather than drawing lines that would rule a choice out.

In public discussions it is most common for those using the terms and concept to give them positive connotation, suggesting at least that what the speaker labels “family friendly” is desirable, and often suggesting that what the speaker so labels is either in less adequate supply than what is not, more desirable than what is not, or desirable to the exclusion of desirability or toleration of what is not.

Also in public discussions, some with opposing views contest those connotations. Some of them may simply avoid the terms on the belief they misname the concept, so that the terminology begs questions of free expression, access to information, and distinguishing personal judgements on values from condemnations of others’ values. Some in effect give unqualified use of “family friendly” a negative connotation by describing their own views as “real family friendliness”, contrasting their own views with “family unfriendly” ones (in ways that imply those are held by advocates of something “family friendly”), or simply ironic intonation in using the words “family friendly”. What is excluded by the term “family friendly” is not a matter of agreement among those who emphasize its use, so some describe the lack of clear denotation of the terms as helping a user appear consistent in their own statements and those of others, while intending different audiences or individuals in the same audience to infer mutually inconsistent implicit meanings from them.

  • Family Friendly Sites

Source image distance; computed

Sunday, April 13th, 2008

Focus film distance (FFD) is the distance between the X-ray source and the film in diagnostic radiography. It has recently been superseded due to the replacement of film with computed radiography or direct digital radiography detectors. There are now various possible alternatives: source image distance (SID); focus image distance (FID); source receptor distance (SRD); and focus receptor distance (FRD). SID seems to be the most common - perhaps as it was already in use as a term in fluoroscopy to describe source intensifier distance.

Omul; consumption represents

Thursday, April 10th, 2008

The Omul or Arctic cisco, Coregonus autumnalis migratorius, is a salmon-like fish found only in the waters of Lake Baikal in Siberia, Russia.

The Omul nourishes itself with plankton and other small animals. Omul represents an important food fish for the Baikal region and, for the rural population, often forms a basis of life. Omul caviar is considered a delicacy. Apart from local consumption, export to the west of Russia is important, though difficult due to the region’s remoteness. Obtaining smoked omul is one of the highlights for many travellers on the Trans-Siberian railway.


References

Ouachita Electric Cooperative; of utility for utility

Thursday, April 10th, 2008

Ouachita Electric Cooperative Corporation is a non-profit rural electric utility cooperative headquartered in Camden, Arkansas, with a district office in Hampton, Arkansas.

The Cooperative was organized in 1938.

The Cooperative serves portions of five counties in the state of Arkansas, in a territory generally surrounding Camden and Hampton.


External links

  • Ouachita Electric Cooperative Corporation

Natural History; than the natural

Tuesday, April 8th, 2008

Natural history or (in Latin) Naturalis Historia is the scientific study of plants or animals.

Natural History may also refer to:

In science and medicine:

  • Natural History (Pliny) , Naturalis Historia, a 1st-century work by Pliny the Elder
  • Natural History (Lonitzer), a 16th-century work by Adam Lonitzer
  • Naturalis Historia Scotiae, a 1684 work by Robert Sibbald
  • Natural History (magazine), an American magazine
  • Natural History Review, a 19th-century UK quarterly journal
  • Natural History Publications (Borneo), a publishing house based in Borneo
  • Natural history of disease, the uninterrupted progression of a medical condition in an individual
    • Natural history group, subjects in a drug trial that receive no treatment of any kind, whose illness is left to run its course

In music:

  • Natural History (I Am Kloot album), a 2001 album by I Am Kloot
  • Natural History: The Very Best of Talk Talk, a 1990 album by Talk Talk
  • The Natural History (band), an American rock band
    • The Natural History, the band’s 2002 debut EP

In literature:

  • A 1992 novel by American writer Maureen Howard
  • A 2003 novel by British writer Justina Robson


See also

  • Natural theology
  • Natural (disambiguation)
  • Nature (disambiguation)

Sayoko Kawauchi; faced

Tuesday, April 8th, 2008
is an athlete from Japan.  She competes in archery.

Kawauchi represented Japan at the 2004 Summer Olympics. She placed 53rd in the women’s individual ranking round with a 72-arrow score of 601. In the first round of elimination, she faced 12th-ranked Nataliya Burdeyna of Ukraine. Kawauchi defeated Burdeyna, winning 137-129 in the 18-arrow match to advance to the round of 32. In that round, she faced Alison Williamson of Great Britain, losing to the 21st-ranked and eventual bronze medalist archer 154-150 in the regulation 18 arrows. Kawauchi finished 26th in women’s individual archery.

Kawauchi was also a member of the 14th-place Japanese women’s archery team.


Link

  • 2004Japan Olympic Committee

Minnesota Public Utilities Commission; Expectation utilities allow

Monday, April 7th, 2008

The Minnesota Public Utilities Commission (PUC) is the consumer protection agency in the U.S. state of Minnesota charged with the regulation of public utilities such as electric and telephone service. Its commissioners are appointed by the governor.


External links

  • Minnesota PUC

Internal Revenue Code section 63; income rises

Thursday, April 3rd, 2008

Section 63 of the Internal Revenue Code defines what constitutes Taxable income in the United States. The section sets forth that taxable income means gross income (which is broadly defined in Internal Revenue Code 61) minus whatever deductions are allowed by that chapter of the IRC. The section provides that individuals may either take itemized deductions, meaning that they may add up their deductible expenses such as college tuition and charitable donations and then subtract that amount from their taxable income, or they may take a standard deduction, reducing their taxable income by an amount set forth elsewhere in the IRC.


External links

  • , Cornell Law School
  • Internal Revenue Code Book

Road cycling; utility

Wednesday, April 2nd, 2008

Road cycling is the most widespread and popular form of bicycle riding. It takes place primarily on paved surfaces. It includes recreational, racing, and utility cycling. Experienced road cyclists generally obey the same rules and laws as other vehicle drivers and are often referred to as vehicular cyclists.

In the context of utility cycling, road cycling fulfils various purposes including commuting and also general transport for work, e.g., bicycle messengering and leisure. There are many types of bikes that are used on the roads, from BMX bikes through to high end road bikes with the Road bicycle being the most common type.

Bikes are usually made from one of four different materials (or a combination of two or more of these materials). These are steel, aluminium, titanium, and carbon fiber. Throughout the world the most commonly used material is steel as it is relatively cheap, strong and is much easier to repair than the other materials that can be used.


See also

  • Bicycle touring
  • Cycling
  • Cyclosportive
  • Road bicycle racing
  • Utility cycling
  • Vehicular cycling

Biocentric individualism; consume

Monday, March 31st, 2008

Biocentric Individualism is a system of environmental ethics proposed by noted environmental ethicist Dr. Gary Varner. It is, in part, a revision of the mental state theory of individual welfare, asserting that there is a hierarchy of things of moral importance:

  • Ground project: Things that answer the question “Why is life worth living?” and consume a significant portion of an individual’s life.
  • Non-biological interests: Interests that aren’t as important as ground projects, but more important than mere biological needs.
  • Biological needs: The lowest classification of needs that are still worthy of moral consideration.


See also

  • Maslow’s hierarchy of needs

Deoxyribonuclease; between two different types

Saturday, March 29th, 2008

A

deoxyribonuclease (DNase, for short) is any enzyme that catalyzes the hydrolytic cleavage of phosphodiester linkages in the DNA backbone. Deoxyribonucleases are thus one type of nuclease. A wide variety of deoxyribonucleases are known, which differ in their substrate specificities, chemical mechanisms, and biological functions.


Modes of action

Some DNases cleave only residues at the ends of DNA molecules (exodeoxyribonucleases, a type of exonuclease). Others cleave anywhere along the chain (endodeoxyribonucleases, a subset of endonucleases).

Some are fairly indiscriminate about the DNA sequence at which they cut, while others, including restriction enzymes, are very sequence-specific.

Some cleave only double-stranded DNA, others are specific for single-stranded molecules, and still others are active toward both.


Types of deoxyribonucleases

The two main types of DNase found in metazoans are known as deoxyribonuclease I and deoxyribonuclease II.

Other types of DNase include Micrococcal nuclease.


References

Associated bundle; bundle that would

Friday, March 28th, 2008

In mathematics, the theory of fiber bundles with a structure group <math>G</math> (a topological group) allows an operation of creating an associated bundle, in which the typical fiber of a bundle changes from <math>F_1</math> to <math>F_2</math>, which are both topological spaces with a group action of <math>G</math>. For a fibre bundle F with structure group G, the transition functions of the fibre (i.e., the cocycle) in an overlap of two coordinate systems Uα and Uβ are given as a G-valued function gαβ on UαUβ. One may then construct a fibre bundle F′ as a new fibre bundle having the same transition functions, but possibly a different fibre.

Contents


An example

A simple case comes with the Möbius strip, for which <math>G</math> is the cyclic group of order 2, <math>\mathbb{Z}/2</math>. We can take as <math>F</math> any of: the real number line <math>\mathbb{R}</math>, the interval <math>[-1,\ 1]</math>, the real number line less the point 0, or the two-point set <math>\{-1,\ 1\}</math>. The action of <math>G</math> on these (the non-identity element acting as <math>x\ \rightarrow\ -x</math> in each case) is comparable, in an intuitive sense. We could say that more formally in terms of gluing two rectangles <math>[-1,\ 1] \times I</math> and <math>[-1,\ 1] \times J</math> together: what we really need is the data to identify <math>[-1,\ 1]</math> to itself directly at one end, and with the twist over at the other end. This data can be written down as a patching function, with values in G. The associated bundle construction is just the observation that this data does just as well for <math>\{-1,\ 1\}</math> as for <math>[-1,\ 1]</math>.


Construction

In general it is enough to explain the transition from a bundle with fiber <math>F</math>, on which <math>G</math> acts, to the associated principal bundle (namely the bundle where the fiber is <math>G</math>, considered to act by translation on itself). For then we can go from <math>F_1</math> to <math>F_2</math>, via the principal bundle. Details in terms of data for an open covering are given as a case of descent.

This section is organized as follows. We first introduce the general procedure for producing an associated bundle, with specified fibre, from a given fibre bundle. This then specializes to the case when the specified fibre is a principal homogeneous space for the left action of the group on itself, yielding the associated principal bundle. If, in addition, a right action is given on the fibre of the principal bundle, we describe how to construct any associated bundle by means of a fibre product construction.All of these constructions are due to Ehresmann (1941-3). Attributed by Steenrod (1951) p. 36.


Associated bundles in general

Let π : EX be a fibre bundle over a topological space X with structure group G and typical fibre F. By definition, there is a left action of G (as a transformation group) on the fibre F. Suppose furthermore that this action is effective.Effectiveness is a common requirement for fibre bundles; see Steenrod (1951). In particular, this condition is necessary to ensure the existence and uniqueness of the principal bundle associated to E.
There is a local trivialization of the bundle E consisting of an open cover Ui of X, and a collection of fibre maps

φi : π-1(Ui) → Ui × F

such that the transition maps are given by elements of G. More precisely, there are continuous functions gij : (UiUj) → G such that

ψij(u,f) := φi o φj-1(u,f) = (u,gij(u)f) for each (u,f) ∈ (UiUj) × F.

Now let F′ be a specified topological space, equipped with a continuous left action of G. Then the bundle associated to E with fibre F′ is a bundle E′ with a local trivialization subordinate to the cover Ui whose transition functions are given by

ψ′ij(u,f′) = (u, gij(u) f′) for (u,f′) ∈(UiUj) × F

where the G-valued functions gij(u) are the same as those obtained from the local trivialization of the original bundle E.

This definition clearly respects the cocycle condition on the transition functions, since in each case they are given by the same system of G-valued functions. (Using another local trivialization, and passing to a common refinement if necessary, the gij transform via the same coboundary.) Hence, by the fiber bundle construction theorem, this produces a fibre bundle E′ with fibre F′ as claimed.


Principal bundle associated to a fibre bundle

As before, suppose that E is a fibre bundle with structure group G. In the special case when G left-acts freely and transitively on F′, so that F′ is a principal homogeneous space for the left action of G on itself, then the associated bundle E′ is called the principal G-bundle associated to the fibre bundle E. If, moreover, the new fibre F′ is identified with G (so that F′ inherits a right action of G as well as a left action), then the right action of G on F′ induces a right action of G on E′. With this choice of identification, E′ becomes a principal bundle in the usual sense. Note that, although there is no canonical way to specify a right action on a principal homogeneous space for G, any two such actions will yield principal bundles which have the same underlying fibre bundle with structure group G (since this comes from the left action of G), and isomorphic as G-spaces in the sense that there is a globally defined G-valued function relating the two.

In this way, a principal G-bundle equipped with a right action is often thought of as part of the data specifying a fibre bundle with structure group G, since to a fibre bundle one may construct the principal bundle via the associated bundle construction. One may then, as in the next section, go the other way around and derive any fibre bundle by using a fibre product.


Fiber bundle associated to a principal bundle

Let π : PX be a principal G-bundle and let ρ : G → Homeo(F) be a continuous left action of G on a space F (in the smooth category, we should have a smooth action on a smooth manifold). Without loss of generality, we can take this action to be effective (ker(ρ) = 1).

Define a right action of G on P × F via

<math>(p,f)\cdot g = (p\cdot g, \rho(g^{-1})f)</math>

We then identify by this action to obtain the space E = P ×ρ F = (P × F) /G. Denote the equivalence class of (p,f) by [p,f]. Note that

<math>[p\cdot g,f] = [p,\rho(g)f] \mbox{ for all } g\in G.</math>

Define a projection map πρ : EX by πρ([p,f]) = π(p). Note that this is well-defined.

Then πρ : EX is a fiber bundle with fiber F and structure group G. The transition functions are given by ρ(tij) where tij are the transition functions of the principal bundle P.


Reduction of structure group

The companion concept to associated bundles is the reduction of the structure group of a <math>G</math>-bundle <math>B</math>. We ask whether there is an <math>H</math>-bundle <math>C</math>, such that the associated <math>G</math>-bundle is <math>B</math>, up to isomorphism. More concretely, this asks whether the transition data for <math>B</math> can consistently be written with values in <math>H</math>. In other words, we ask to identify the image of the associated bundle mapping (which is actually a functor).


Examples of reduction

Examples for vector bundles include: the introduction of a metric resulting in reduction of the structure group from a general linear group GL(n) to an orthogonal group O(n); and the existence of complex structure on a real bundle resulting in reduction of the structure group from real general linear group GL(2n,R) to complex general linear group GL(n,C).

Another important case is finding a decomposition of a vector bundle V of rank n as a Whitney sum (direct sum) of sub-bundles of rank k and n-k, resulting in reduction of the structure group from GL(n,R) to GL(k,R) × GL(n-k,R).

One can also express the condition for a foliation to be defined as a reduction of the tangent bundle to a block matrix subgroup - but here the reduction is only a necessary condition, there being an integrability condition so that the Frobenius theorem applies.


See also

  • Spinor bundle


References

Shell integration; multiplied by

Thursday, March 27th, 2008

Shell integration (the shell method in integral calculus) is a means of calculating the volume of a solid of revolution, when integrating along an axis perpendicular to the axis of revolution.

It makes use of the so-called “representative cylinder”. Intuitively speaking, part of the graph of a function is rotated around an axis, and is modelled by an infinite number of hollow pipes, all infinitely thin.

The idea is that a “representative rectangle” (used in the most basic forms of integration – such as ∫ x dx) can be rotated about the axis of revolution; thus generating a hollow cylinder. Integration, as an accumulative process, can then calculate the integrated volume of a “family” of shells (a shell being the outer edge of a hollow cylinder) – as volume is the antiderivative of area, if one can calculate the lateral surface area of a shell, one can then calculate its volume.

The necessary equation, for calculating such a volume, V, is slightly different depending on which axis is serving as the axis of revolution. These equations note that the lateral surface area of a shell equals: 2 pi (π) multiplied by the cylinder’s average radius, p(y), multiplied by the length of the cylinder, h(y). One can calculate the volume of a representative shell by: 2π * p(y) * h(y) * dy, where dy is the thickness of the shell – that being some number approaching zero.

Shell integration can be considered a special case of evaluating a double integral in polar coordinates.


Calculation

Mathematically, this method is represented by:

<math>2\pi \int_{a}^{b} p(y) h(y)\,dy</math>

if the rotation is around the x-axis (horizontal axis of revolution), or

<math>2\pi \int_{a}^{b} p(x) h(x)\,dx</math>

if the rotation is around the y-axis (vertical axis of revolution).

So here the function p(x) is the distance from the axis and h(x) is the length of the shell, generally the function being rotated. The values for a and b are the limits of integration, the starting and stopping points of the rotated shape (note the limits are units of the Axis of Revolution).


See also

  • Solid of revolution
  • Disk integration

Acidifier; Non-decreasing

Thursday, March 27th, 2008

Acidifiers are inorganic chemicals that either produce or become acid.

These chemicals increase the level of gastric acid in the stomach when ingested, thus decreasing the stomach pH level.

These are many types of acidifiers but the main four types are:

  • Gastric Acidifiers
  • Urinary Acidifiers
  • Systemic Acidifiers
  • Acid

Animal Kingdom; be mistaken for that

Thursday, March 27th, 2008
  • Animal Kingdom is a Disney theme park at Walt Disney World, which opened on 22 April, 1998.
  • Also Animal. Historically in taxonomy the Animal Kingdom (Animalia) referred to animals, as different from Plants (and Minerals). Using the most recent system (1990); plants, animals, and some other lifeforms are classed in Eukarya.
  • Can also be a mistaken reference to Mutual of Omaha’s Wild Kingdom

Paul Zeitz; by solving

Wednesday, March 26th, 2008

Paul Zeitz is an Associate Professor of Mathematics at the University of San Francisco. He is the author of The Art and Craft of Problem Solving, and a co-author of Statistical Explorations with Excel.


Biography

In 1974 Paul Zeitz won the USA Mathematical Olympiad (USAMO) and was a member of the first American team to participate in the International Mathematical Olympiad (IMO).

Since 1985, he has composed and edited problems for several national math contests, including the USAMO. He has helped train several American IMO teams, most notably the 1994 “Dream Team”, the only team from any country to ever score a perfect 252 in the Olympiad.

Zeitz founded the Bay Area Math Meet in 1994 and co-founded the Bay Area Mathematical Olympiad in 1999. In 1999 he wrote The Art and Craft of Problem Solving ISBN 0-471-13571-2, a popular book on problem solving.

Note: The Executive Director of the Global AIDS Alliance is also named Paul Zeitz. However, this is not the same person.

Venice Biennale of architecture; utilities or

Tuesday, March 25th, 2008

Venice Biennale of architecture (1883-1927) originated as a renaissance on urban settings to promote the highly esthetic preferences of Pope Warren III. The movement washed through Europe spreading its extents to Iran and Nigeria. The secretive and effective undermining of local policies gave birth to an oppositional regime called MUTTS, Move Utilities To The Surface, which endeavored to celebrate the equipment and methods of resource delivery. To avoid the devastation of conflict, both groups arranged to Art-Deco modification of existing utilities in 1922.

Mostra di Architettura di Venezia, the Architecture section of the Venice Biennale was established in 1980, although architecture had been a part of the art biennale since 1975. The 2004 exhibition was called the “Metamorph”. The 10th exhbition, in 2006, was directed by Richard Burdett and dedicated to the theme of Cities, architecture and society.

As well as addressing the academic side of architecture, the Biennale is an occasion where big-name architects and designers can showcase new projects, arranged in different pavilions, each with different themes.

Product finder; consumer’s

Saturday, March 22nd, 2008

Product finders are information systems that help consumers to identify products within a large palette of similar alternative products. Product finders differ in complexity, the more complex among them being a special case of decision support systems. Conventional decision support systems, however, aim at specialized user groups, e.g. marketing managers, whereas product finders focus on consumers.


Area of application

Usually, product finders are part of an e-shop or an online presentation of a product-line. Being part of an e-shop, a product finder ideally leads to an online buy, while conventional distribution channels are involved in product finders that are part of an online presentation (e.g. shops, order by phone).

Product finders are best suited for product groups whose individual products are comparable by specific criteria. This is true, in most cases, with technical products such as notebooks: their features (e.g. clock rate, size of harddisk, price, screen size) may influence the consumer’s decision.

Beside technical products such as notebooks, cars, dish washers, cell phones or GPS devices, non-technical products such as wine, socks, toothbrushes or nails may be supported by product finders as well, as comparison by features takes place.

On the other hand, the application of product finders is limited when it comes to individualized products such as books, jewelry or compact discs as consumers do not select such products along specific, comparable features.

Furthermore, product finders are used not only for products sensu strictu, but for services as well, e.g. account types of a bank, health insurance, or communication providers. In these cases, the term service finder is used sometimes.

Product finders are used both by manufacturers, dealers (comprising several manufacturers), and web portals (comprising several dealers).


Technical implementation

Technical implementations differ in their benefit for the consumers. The following list displays the main approaches, from simple ones to more complex ones, each with a typical example:

  1. String search [1]
  2. Comparison table [2]
  3. Menu trees [3]
  4. Dialog systems [4]
  5. Filtering systems [5]
  6. Scoring systems [6]
  7. Tagging clouds [7]


See also

  • recommendation system

Plunging fire; indirect because

Wednesday, March 19th, 2008

Plunging fire is gunfire directed upon an enemy from an elevated position or gunfire aimed so as to fall on an enemy from above.

In naval warfare plunging fire was often used to penetrate an enemy ship’s thinner deck armor rather than firing directly at an enemy’s side.

Plunging fire can be a form of indirect fire.

The Howitzer Cannon uses this kind of gunfire.

Asymmetric price transmission; prices cannot open

Tuesday, March 18th, 2008

Asymmetric Price Transmission (sometimes abbreviated as APT) refers to pricing phenomenon occurring when downstream prices react in a different manner to upstream price changes, depending on the characteristics of upstream prices or changes in those prices.

The simplest example is when prices of ready products increase promptly whenever prices of inputs increase, but take time to decrease after input price decreases.

Contents


Introduction


Terminology

In business terms, price transmission means the process in which upstream prices affect downstream prices. Upstream prices should be thought of in terms of main inputs prices (for processing / manufacturing, etc.) or prices quoted on higher market levels (e.g. wholesale markets). Accordingly, downstream prices should be thought of in terms of output prices (for processing / manufacturing, etc.) or prices quoted on lower market levels (e.g. retail markets).


Background Theory

Since (by definition) upstream and downstream prices are related:

  • in absence of external shocks, some kind of economic equilibrium relationship between those two should exist;
  • external shocks to the system (i.e. shocks to downstream or upstream prices) should trigger short- and long-run adjustment towards the long-run equilibrium, as:
    • rational economic agents price their goods so as to maximize their constant utility function;
    • in the long run prices of goods should reflect their scarcity.


Example of Price Transmission

Price transmission is best illustrated by an example. Assume that:

  • commodities analysed are:

    • crude oil - global upstream, and
    • petroleum - local downstream;
  • market for petroleum in question is small compared to market for crude oil (in terms of quantities sold / bought), so that downstream prices cannot drive upstream prices;
    • in the short run, only crude oil prices drive petroleum prices (i.e. prices of other inputs are assumed to be constant);
    • no substitutes to petroleum are available in the short run.

Given the above, one might expect that:

  • increases and decreases in crude oil prices trigger appropriate changes downstream;
  • resulting changes are symmetric in terms of absolute size / timing.

Such behaviour, predicted by all canonical industry / market pricing models (perfect competition, monopoly) is called Symmetric Price Transmission.

In contrast to Symmetric price transmission, Asymmetric Price Transmission is said to exist when the adjustment of prices is not homogeneous with respect to characteristics external or internal to the system. As an example of Asymmetric Price Transmission consider a situation when:

  • increases in crude oil prices lead to immediate increases in petroleum prices, but decreases in crude oil prices take time to be passed down to petroleum prices. This asymmetry is referred to as time asymmetry and is illustrated by the bottom right panel of Figure 1, or
  • combination of the time asymmetry and the size asymmetry (i.e. a situation when increases in crude oil prices lead to bigger changes (in absolute values) in petroleum prices than decreases). This asymmetry is illustrated by the bottom right panel of Figure 2.

One should remember that the size asymmetry (as illustrated by the bottom right panel of Figure 3) cannot occur on its own. If that had been the case the upstream prices and downstream prices would drift apart. Since downstream prices and upstream prices are by definition related to each other, this cannot be the case. Accordingly, size asymmetry can occur only together with time asymmetry and only when the Long Run relationship between prices is restored after the impulse shock to upstream prices.


Consequences

The issue of Asymmetric Price Transmission received a considerable attention in economic literature because of two reasons.

Firstly, its presence is not in line with predictions of the canonical economic theory (e.g. perfect competition and monopoly), which expect that under some regularity assumptions (such as non-kinked, convex/concave demand function) downstream responses to upstream changes should be symmetric in terms of absolute size and timing.

Secondly, because of the size of the some markets on which Asymmetric Price Transmission takes place (such as petroleum markets), global dependence on some products (again oil) and the share of income spent by average household on some products (again petroleum products), Asymmetric Price Transmission is important from the welfare point of view. One must remember that APT implies a welfare redistribution from agents downstream to agents upstream (presumably consumers to large energy companies), it has serious political and social consequences.

The welfare redistribution effect (per unit of the good) is marked as a shaded area in Figures 1-3.


References

  • GAO (1993). Energy security and policy: Analysis of the pricing of crude oil and petroleum products: Report by General Accounting Office. GAO, Washington, DC.
  • Meyer, J. and von Cramon-Taubadel, S. v. (2004). Asymmetric price transmission: A survey. Journal of Agricultural Economics, 55(3):pp.581-611.
  • Peltzman, S. (2000). Prices rise faster than they fall. Journal of Political Economy, 108(3), 466:501.
  • Wlazlowski, S. S. (2003). Petrol and crude oil prices: Asymmetric price transmission. Ekonomia / Economics, 11:pp.1-25.