Factor price

About: Factor price is a research topic. Over the lifetime, 2764 publications have been published within this topic receiving 86176 citations.

The computational effect of price endings in multi‐dimensional price advertising

Abstract: Research in marketing indicates that consumers may be sensitive to the final digits of prices. For example, despite being substantively equivalent, a price such as $199 may create more favorable price perceptions than $200. However, existing research has primarily focused on the effects of price endings in the context of uni‐dimensional prices – prices consisting of a single number. Advertised prices in the marketplace are often multi‐dimensional, consisting of numerous price dimensions. In such pricing contexts, price endings may influence consumers’ ability to conduct the arithmetic required to compute the total advertised price. Examines the effect of various price ending strategies on consumers’ computational efforts. The findings indicate that the more commonly exercised price ending strategies tend to result in prices that are the most difficult for consumers to evaluate.

The role of inventory adjustments in quantifying factors causing food price inflation

Abstract: The food commodity price increases beginning in 2001 and culminating in the food crisis of 2007/08 reflected a combination of several factors, including economic growth, biofuel expansion, exchange rate fluctuations, and energy price inflation. To quantify these influences, the authors developed an empirical model that also included crop inventory adjustments. The study shows that, if inventory effects are not taken into account, the impacts of the various factors on food commodity price inflation would be overestimated. If the analysis ignores crop inventory adjustments, it indicates that prices of corn, soybean, rapeseed, rice, and wheat would have been, respectively, 42, 38, 52, and 45 percent lower than the corresponding observed prices in 2007. If inventories are properly taken into account, the contributions of the above mentioned factors to those commodity prices are 36, 26, 26, and 35 percent, respectively. Those four factors, taken together, explain 70 percent of the price increase for corn, 55 percent for soybean, 54 percent for wheat, and 47 percent for rice during the 2001-2007 period. Other factors, such as speculation, trade policy, and weather shocks, which are not included in the analysis, might be responsible for the remaining contribution to the food commodity price increases.

Pricing strategy and the formation and evolution of reference price perceptions in new product categories

Abstract: This study examines the formation and evolution of reference price perceptions in new product categories. It contributes to our understanding of pricing new products by integrating two important research streams in marketing-reference price theory and the theory of pioneer brand advantage. Prior research has focused solely on products in existing or incrementally new categories, and has typically examined fast-moving consumer goods. Using a cross-sectional experiment to study the formation of reference price perceptions, and a separate, but related, longitudinal experiment to study the evolution of reference price perceptions, the findings suggest that the pioneer brand's initial price defines a consumer's initial reference price, whether the pioneer is following a skimming or a penetration strategy. This effect endures in later time periods where the initial price affects consumer perceptions of value and purchase intention. The study also finds that the pioneer, due to its prototypicality, has a stronger influence on reference price perceptions than the follower, creating a systematic bias to both the formation and evolution of reference price perceptions in new product categories. Thus, reference price perceptions are shaped by what the pioneer does, rather than what the follower does. Furthermore, category-level reference prices exist and explain purchase intention, but do not improve over brand-specific measures in this regard. These findings have implications for pricing strategy and the theory of reference prices. (C) 2010 Wiley Periodicals, Inc.

Joint Pricing and Inventory Policies for Make-to-Stock Products with Deterministic Price-Sensitive Demand

Abstract: In this paper, we focus on a firm selling a single make-to-stock product to price-sensitive end customers. We develop an integrated operations-marketing model that can help determine the relevant profit-maximizing decision variable values for two pricing policies that the firm might follow - price as a decision variable, which is advocated by academicians, and mark-up pricing, used by most practitioners. We first consider an EOQ-based model with price and order quantity as independent decision variables. We then develop an analogous model where price is a mark-up over operating costs per unit, and order quantity becomes the sole decision variable. We are able to ascertain the optimal decision variable values for each model for log-linear and linear demand functions. We prove that for such profitmaximizing models, the optimal batch size is not necessarily monotone increasing in set-up cost. Interestingly, our numerical/analytical evidence suggests that from a profit perspective it is better for managers to be aggressive on price rather than reducing price too much, especially for highly price-sensitive and non-linear demand. Moreover, we establish that, in general, the profit penalty for not including inventory costs in determining the optimal batch size, or ignoring the batch size optimization issue in a mark-up price model is not significant. Only when the set-up cost is quite high and/or the firm faces non-linear demand from highly price-sensitive end consumers does it become crucial for managers to determine the exact optimal batch size and base the mark-up price on the entire unit operating cost, not only the unit (variable) production cost.