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Factor price
About: Factor price is a research topic. Over the lifetime, 2764 publications have been published within this topic receiving 86176 citations.
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TL;DR: In this article, an agent-based framework is proposed to examine the effectiveness of price limits in an artificial stock market composed of many boundedly rational and heterogeneous traders whose learning behavior is represented by a genetic programming algorithm.
54 citations
TL;DR: In this article, the authors analyze price formation and liquidity in a non-anonymous environment as it can also be found on the floor of the NYSE and find that price improvement reflects lower adverse selection costs but does not lead to a reduction in the specialist's profit.
Abstract: Using data from the Frankfurt Stock Exchange we analyze price formation and liquidity in a non-anonymous environment as it can also be found on the floor of the NYSE. Our main hypothesis is that the non-anonymity allows the specialist to assess the probability that a trader trades on the basis of private information. He uses this knowledge to price discriminate. This can be achieved by quoting a large spread and granting price improvement to traders deemed uninformed. Consistent with our hypothesis we find that price improvement reflects lower adverse selection costs but does not lead to a reduction in the specialist's profit. Further, the quote adjustment following transactions at the quoted bid or ask price is more pronounced than the quote adjustment after transactions at prices inside the spread.
54 citations
TL;DR: In this paper, it was shown that the expected compensating variation is not a valid utility indicator, since it is completely insensitive to the consumer's attitudes toward risk, and therefore cannot reflect, the precise factor of interest in such studies.
Abstract: Suppose a consumer faces a price which is uncertain ex ante. A question which often arises is whether the consumer would benefit from a stabilization policy under which the price would then be fixed and known with certainty. Many authors have addressed this question by calculating the expected compensating variation of the price change; others have used expected Marshallian consumer's surplus, often with the explanation that it is a good approximation to expected compensating variation.2 An important unresolved issue, however, is whether expected compensating variation does in fact provide a valid ranking of stochastic prices against stabilized prices, i.e., a ranking in agreement with that given by expected utility. In Section 2, we demonstrate that expected compensating variation is not in general a valid utility indicator. In essence, while utility comparisons under uncertainty require the use of the cardinal properties of (von NeumannMorgenstern) utility functions, the expected surplus measures depend only on ordinal preference rankings. Expected compensating variation, then, is completely insensitive to, and cannot reflect, the precise factor of interest in suchstudies: the consumer's attitudes toward risk. We then derive a set of restrictions on the utility function which are necessary in order for expected compensating variation to be a valid measure. We see that price stabilization policies can only be evaluated with compensating variation if consumer preferences are assumed to satisfy quite stringent requirements. This is in constrast to the familiar certainty case in which compensating variation always provides correct rankings.
53 citations
01 Mar 2009
TL;DR: This paper models a noncooperative pure pricing game among multiple competing retailers who sell a certain branded product under price-dependent stochastic demands and demonstrates the use of service level to build price walls which can prevent a huge drop in price, as well as profit.
Abstract: In this paper, we apply the game theory to study some strategic actions for retailers to fight a price war. We start by modeling a noncooperative pure pricing game among multiple competing retailers who sell a certain branded product under price-dependent stochastic demands. A unique Nash equilibrium is proven to exist under some mild conditions. We demonstrate mathematically the incentives for retailers to start a price war. Based on a strategic framework via the game theory, we illustrate the use of service level to build price walls which can prevent a huge drop in price, as well as profit. Three kinds of price walls are proposed, and the respective strengths and weaknesses have been studied. Analytical conditions, under which a price wall can effectively prevent big drops in both market share and profit, are developed. Aside from the proposed price walls, two other pricing strategies, which can lead to an all-win situation, are examined.
53 citations
TL;DR: In this paper, the authors present strategic recommendations for improving the way in which prices are changed within organizations, by broadening the definition of the costs of changing price and then presenting strategic recommendations.
53 citations