Phillip J. Lederer

Bio: Phillip J. Lederer is an academic researcher from University of Rochester. The author has contributed to research in topics: Profit (economics) & Limit price. The author has an hindex of 12, co-authored 33 publications receiving 1251 citations. Previous affiliations of Phillip J. Lederer include Saint Petersburg State University.

Competition of firms: discriminatory pricing and location1

Abstract: Two costlessly mobile firms are to be located in a market region, a subset of the plane. The firms compete by setting locations and delivered price schedules. To study this competitive stiuation an appropriate extensive form game is defined, along with an appropri- ate noncooperative solution concept. Existence and general properties of the equilibrium are demonstrated. Among the results are: Each firm increases its profit by locating so as to decrease total cost to both firms of serving the market. Firms will never locate coinciden- tally if they have identical production costs and transport cost rates, or if these are different and the firms are located in a circular market region having a uniform demand distribution. THIS PAPER STUDIES competition between two profit maximizing firms in space who are costlessly mobile and may discriminate in price. We will allow the firms to set locations and delivered price schedules and we will be concerned with the existence- and properties of equilibria in location and price. Starting with Hotelling (9), the spatial competition literature has focused on location on bounded linear markets by two or more firms. Hotelling assumed identical firms that produced a single good with constant cost of production and considered consumers to be uniformly distributed and to have inelastic demand. He also assumed that the consumers pay transport cost and purchase the good from the cheapest source. Hotelling claimed that a Nash equilibrium in locations for the two firm market existed and yielded "back-to-back" locations at the center of the market. Many authors, most recently, D'Aspremont, Gabszewicz, and Thisse (2) have noted that an equilbrium in prices and location does not exist for Hotelling's model. However, if the firms employ identical exogeneously specified prices, Hotelling's conclusions hold. Subsequent work by Smithies (14), Hartwick and Hartwick (7), and Eaton (3) claimed to show that a Nash equi- librium in f.o.b. prices and locations can exist in markets with a uniform distribu- tion of consumers each of whom have identical elastic demand functions for the two and three firm problems. The work of D'Aspremont et al. casts doubt on these conclusions without the adoption of restrictive conditions. Our work contrasts with these works and related research which has dealt with linear markets, with uniform distributions of customers and with identical firms. Our work will involve markets that are subsets of the plane having nonuniform distributions of customers. Our firms will be allowed to be different, that is, have differences in production and transport costs. However, the fundamental difference in our approach is that our firms will set discriminatory prices and not price f.o.b. In many ways our work will represent the discriminatory pricing

Pricing, Production, Scheduling, and Delivery-Time Competition

Abstract: This paper studies competition between firms that produce goods or services for customers sensitive to delay time. Firms compete by setting prices and production rates for each type of customer and by choosing scheduling policies. The existence of a competitive equilibrium is proved. The competitive equilibrium is well defined whether or not a firm can differentiate between customers based upon physical characteristics because each customer has incentive to truthfully reveal its delay cost. Further insights are derived in two special cases. A unique equilibrium exists for each of the cases. In the first case, firms are differentiated by cost, mean processing time, and processing time variability, but customers are homogeneous. The conclusions include that a faster, lower variability and lower cost firm always has a larger market share, higher capacity utilization, and higher profits. However, this firm may have higher prices and faster delivery time, or lower prices and longer delivery time. In the second...

Airline Scheduling and Routing in a Hub-and-Spoke System

Abstract: This paper studies the competitive choice of flight schedules and route prices by airlines operating in a hub-and-spoke system. Airlines choose flight schedules and route prices to maximize profit, considering competitors' decisions. This research makes three contributions. First, an expression is derived calculating demand for each route as a function of the service quality and prices of all routes. Second, a mathematical programming heuristic is developed to find the schedule and prices that maximize an airline's profit against fixed schedules and prices for other airlines. Third, the heuristic is used to study competition by allowing each airline to optimize its schedule and prices against the others' choices and by searching for an equilibrium. The performance of the algorithm is evaluated against alternate heuristics and a five-city sample problem is presented. Finally, two competitive examples are presented and analyzed.

Airline Network Design

Abstract: The goal of this paper is to understand choices of networks and schedules by a profit maximizing airline. By "network" we mean the routing pattern for planes and by "schedule" we mean the frequency of service between cities and the amount of time put into the schedule to assure on-time arrival. This paper analyzes network and schedule choice using an "idealized" model that permits derivation of analytic, closed form expressions for airline and passenger costs. Many important conclusions are obtained. It is optimal for a profit maximizing airline to design its network and schedule to minimize the sum of airline and passenger costs. Profit maximizing choice of schedule frequency depends on the network. Direct service has lower schedule frequency than other networks. Parametric studies are performed on the effect of distance between cities, demand rate, and the number of cities served on the choice of the network. Some conclusions are: (1) If the distance between cities is very small, then direct service is optimal; otherwise, other networks, such as hub and spoke are optimal. (2) Similarly, for very high demand rates, direct service is optimal; and for intermediate values, hub and spoke is optimal. (3) If the number of cities is small, direct service dominates; and if it is large, hub and spoke is optimal. We note that any airline's schedule includes safety time as a buffer against delays, and we demonstrate that schedule reliability is highest for direct routing. Surprisingly, the amount of time that is added to the schedule to buffer delays is relatively less in direct networks than in other networks. This can explain the superior on-time performance and high equipment utilization of direct carriers such as Southwest Airlines.

Out of the Crisis

Abstract: According to W. Edwards Deming, American companies require nothing less than a transformation of management style and of governmental relations with industry. In Out of the Crisis, originally published in 1982, Deming offers a theory of management based on his famous 14 Points for Management. Management's failure to plan for the future, he claims, brings about loss of market, which brings about loss of jobs. Management must be judged not only by the quarterly dividend, but by innovative plans to stay in business, protect investment, ensure future dividends, and provide more jobs through improved product and service. In simple, direct language, he explains the principles of management transformation and how to apply them.

Revenue Management: Research Overview and Prospects

Abstract: This survey reviews the forty-year history of research on transportation revenue management (also known as yield management). We cover developments in forecasting, overbooking, seat inventory control, and pricing, as they relate to revenue management, and suggest future research directions. The survey includes a glossary of revenue management terminology and a bibliography of over 190 references.

An Empirical Analysis of the Effect of Supply Chain Disruptions on Long-Run Stock Price Performance and Equity Risk of the Firm

Abstract: This paper investigates the long-term stock price effects and equity risk effects of supply chain disruptions based on a sample of 827 disruption announcements made during 1989–2000. Stock price effects are examined starting one year before through two years after the disruption announcement date. Over this time period the average abnormal stock returns of firms that experienced disruptions is nearly –40%. Much of this underperformance is observed in the year before the announcement, the day of the announcement, and the year after the announcement. Furthermore, the evidence indicates that firms do not quickly recover from the negative effects of disruptions. The equity risk of the firm also increases significantly around the announcement date. The equity risk in the year after the announcement is 13.50% higher when compared to the equity risk in the year before the announcement.