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Michael Beenstock
''Correlated shocks may reduce outcome correlations when outcomes are endogenous: a new paradox''
( 2019, Vol. 39 No.2 )
Correlated shocks normally increase correlations between outcomes. This note shows that when goods are substitutes in supply or demand, price correlations may vary inversely with the correlation between their shocks. This new paradox is explained.
Keywords: correlated shocks, price correlation, new paradox
JEL: D4 - Market Structure and Pricing: General
C4 - Econometric and Statistical Methods: Special Topics
Manuscript Received : Dec 04 2018 Manuscript Accepted : Jun 23 2019

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