Showing papers on "Fixed price published in 1994"

Optimal dynamic pricing of inventories with stochastic demand over finite horizons

Abstract: In many industries, managers face the problem of selling a given stock of items by a deadline We investigate the problem of dynamically pricing such inventories when demand is price sensitive and stochastic and the firm's objective is to maximize expected revenues Examples that fit this framework include retailers selling fashion and seasonal goods and the travel and leisure industry, which markets space such as seats on airline flights, cabins on vacation cruises, and rooms in hotels that become worthless if not sold by a specific time We formulate this problem using intensity control and obtain structural monotonicity results for the optimal intensity resp, price as a function of the stock level and the length of the horizon For a particular exponential family of demand functions, we find the optimal pricing policy in closed form For general demand functions, we find an upper bound on the expected revenue based on analyzing the deterministic version of the problem and use this bound to prove that simple, fixed price policies are asymptotically optimal as the volume of expected sales tends to infinity Finally, we extend our results to the case where demand is compound Poisson; only a finite number of prices is allowed; the demand rate is time varying; holding costs are incurred and cash flows are discounted; the initial stock is a decision variable; and reordering, overbooking, and random cancellations are allowed

Signaling and Takeover Deterrence with Stock Repurchases: Dutch Auctions versus Fixed Price Tender Offers

Abstract: This article presents a model of repurchase tender offers in which firms choose between the Dutch auction method and the fixed price method. Dutch auction repurchases are more effective takeover deterrents, while fixed price repurchases are more effective signals of undervaluation. The model yields empirical implications regarding price effects of repurchases, likelihood of takeover, managerial compensation, and cross-sectional differences in the elasticity of the supply curve for shares. FIRMS THAT WISH TO repurchase a large number of their outstanding shares in a short period of time do so by making a tender offer. Two motivations for these tender offers have received the most attention in the literature: signaling that the firm is undervalued, and defending the firm against a takeover.' The traditional type of repurchase tender offer is a fixed price tender offer, whereby the firm offers to repurchase shares at a stated price per share, and shareholders who wish to sell their shares tender them to the firm. A different tender offer mechanism, the "Dutch auction," gained popularity in the 1980s.2 In a Dutch auction repurchase, the firm announces the number of shares it wishes to repurchase, and shareholders specify the price at which they are willing to sell their shares to the firm. The firm aggregates these asking prices into a supply schedule and calculates the price necessary to purchase the stated number of shares. It then pays the cutoff price to shareholders who tendered at this price or less, while shareholders who tendered at higher prices keep their shares. In a traditional tender offer, the repurchase price is set by the firm, but the number of shares repurchased

Price commitment in search markets

Abstract: This paper studies the formation of pricing rules in search markets. At a cost, each seller can commit himself to a fixed price. If he takes no actions to preclude haggling, his sales price is determined through bilateral negotiations with the buyer. The selection of pricing rules exhibits strategic complementarities that may give rise to multiple equilibria. Differences in trading practices across countries and cultures may thus be consistent with equilibrium behavior. In bazaar markets, where the buyer's cost of switching sellers is relatively low, most of the trade is conducted via bargaining and prices are close to the perfectly competitive outcome.

Sequential selling mechanisms

Abstract: In this paper we attempt to formalize the idea that a mechanism that involves multilateral communication between buyers and sellers may be dominated by one that involves simple bilateral communication. To do this we consider the well known problem in which a seller tries to sell a single unit of output to a group ofN buyers who have independently distributed private valuations. Our arguments hinge on two considerations. First, buyers communicate their willingness to negotiate with the seller sequentially, and second, buyers have the option of purchasing the good from some alternative supplier. It is shown that the seller cannot improve upon a procedure in which she offers the good to each buyer in turn at a fixed price. The seller reverts to multilateral communication if possible, only when no buyer is willing to pay the fixed price. In reasonable environments buyers will be too impatient to wait for the outcome of a multilateral negotiation and all communications will be bilateral.

The efficient allocation of risk in contracts

Abstract: This paper considers how project risk should be allocated between clients and contractors, where significant project risk is characterized as uncertainty about project costs requiring explicit attention and policy or behaviour modification. The risk efficiency of cost reimbursement and fixed price contracts given different degrees of client and contractor risk aversion is considered first, using a novel form of model. Then the potential for efficient risk sharing is considered in a mean-variance framework. The concern in both cases is with clarifying the rationale for conventional wisdom and resolving conflicting rules of thumb. Finally, practical application of the analysis with a mixture of controllable and uncontrollable risks is discussed.

Changing Fortunes, Hospital Behaviors, and Ownership Forms

Abstract: The U.S. hospital industry is unusual in that for-profit, private nonprofit, and public entities compete side-by-side. We evaluate alternate theories of the nonprofit form employing three approaches: an historical review, a case study, and an econometric analysis. The metaphor of an ecosystem, bringing to mind disparate organizations in coadapting relationships, helps explain the historical ebbs and flows of ownership structures in the U.S. hospital industry. The entry and exit of for-profit hospitals appears consistent with dynamic efficiency in resource allocation. Our econometric analysis focuses on hospital behaviors in California and Florida during 1982-1990, a period corresponding to a shift in the reimbursement system from cost-pass-through to fixed price. The reimbursement change does not lead to differences in the mix of services provided by different ownership forms. While for-profits reduce their level of uncompensated care, their payer mix of Medicare, Medicaid and private patients continues to be similar to that of nonprofit non-teaching hospitals. No absolute cost advantages to for-profits emerge, not even relative success in cost containment by large-chain for-profits. The main response of large-chain for-profits to reimbursement pressures has been reorganizations.

The Adjustment of Prices to Monetary Shocks When Trade is Uncertain and Sequential

Abstract: Trade: is both uncertain and sequential. Money surprises are not neutral because prices at the beginning of the trading process cannot depend on its end. Unlike fixed price models, here sellers can change prices during trade. Unlike Lucas (1972) , here there is no asymmetry in the information about the money supply. The price quoted by individual sellers may adjust slowly to changes in the targeted money supply, but the distribution of quoted prices adjusts perfectly to these changes and the real price distribution is independent of the anticipated rate of change in the money supply.

The Job-Order Contracting Solution

Abstract: A new method of contracting, Job Order Contracting, combines many contracts into one administered by one project team. They are competitively bid, indefinite delivery, indefinite quantity, fixed price contracts. They cover all types of construction maintenance, repair and renovation assignments. The method began in the military, when NATO forces were overwhelmed with work and needed an approach that would save time. Using, JOC’s owners need only go through the competitive bidding process once instead of many times. Contract administration is minimized, and in-house staff resources stretched to accomplish other tasks. In many cases, the cost of work has been lower than when using conventional methods. JOC’s are being used in the public sector other than military, at state, county and municipal levels. Several examples are given, with comments from officials using JOC’s. The method shows promise for private sector clients as well.

Electronic taximeter for accounting journeys based on a fixed price

Abstract: For the accounting of a journey based on a fixed-price agreement, it is proposed to extend a known taxi meter, to the effect that the agreed fixed price can be entered in the taxi meter before the start of the journey, and that this journey price is indicated invariably until the end of the journey. Entry is to be made in this case preferably by the selection and confirmation of prices which are filed in the taxi meter and are recorded in tabulated form according to journey destinations and which can be indicated by the call-up of journey-destination codes.