Showing papers on "Limit price published in 2020"
TL;DR: This paper examined how the media influences retail trade and market returns during the "quiet period" that follows a firm's IPO and found that more media coverage during this period is associated with more purchases by retail investors and that such purchases are attention-driven, rather than information-based.
41 citations
TL;DR: In this paper, a dynamic limit pricing model where an incumbent repeatedly signals information relevant to a potential entrant's expected profitability is developed, with a unique equilibriu-based model.
Abstract: We develop a dynamic limit pricing model where an incumbent repeatedly signals information relevant to a potential entrant’s expected profitability. The model is tractable, with a unique equilibriu...
32 citations
TL;DR: This work shows that, under very general conditions on the stochastic demand function, the objective function is concave along the optimal price path provided that the price is decreasing in the post-order inventory level, and suggests that the restriction of decreasing price path does not lead to a significant optimality gap.
Abstract: Inventory-based pricing under lost sales is an important yet notoriously challenging problem in the operations management literature. The vast existing literature on this problem focuses on identif...
29 citations
TL;DR: In this paper, the authors study the incentives to engage in exclusionary pricing in the context of two-sided markets and show that the stronger the network externality, the lower the thresholds for which incumbent platforms find it profitable to exclude.
9 citations
TL;DR: In this article, the authors propose a general model of oligopoly with firms relying on a two-factor production function, and show that there is a unique equilibrium prediction in pure strategies, whatever the returns to scale, characterized by a price that increases with the number of firms up to a threshold.
Abstract: We propose a general model of oligopoly with firms relying on a two factor production function. In a first stage, firms choose a certain fixed factor level (capacity). In the second stage, firms compete on price, and adjust the variable factor to satisfy all the demand. When the factors are substitutable, the capacity constraint is " soft " , implying a convex cost function in the second stage. We show that there is a unique equilibrium prediction in pure strategies, whatever the returns to scale, characterized by a price that increases with the number of firms up to a threshold. The main propositions are established under the general assumption that the production function is quasi-concave but the paper provides a general methodology allowing the model to be solved numerically for special parametrical forms.
7 citations
TL;DR: In this paper, the authors used a moment inequalities approach to estimate a discrete-choice dynamic model of a multiproduct firm facing menu costs, and found that both types of menu costs exist and are substantial.
3 citations
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TL;DR: In this article, the authors study the incentives to engage in exclusionary pricing in the context of two-sided markets and show that the stronger the network externality, the lower the thresholds for which incumbent platforms find it profitable to exclude.
Abstract: This paper studies the incentives to engage in exclusionary pricing in the context of two-sided markets. Platforms are horizontally differentiated, and seek to attract users of two groups who single-home and enjoy indirect network externalities from the size of the opposite user group active on the same platform. The entrant incurs a fixed cost of entry, and the incumbent can commit to its prices before the entry decision is taken. The incumbent has thus the option to either accommodate entry, or to exclude entry and enjoy monopolistic profits, albeit under the constraint that its price must be low enough to not leave any room for an entrant to cover its fixed cost of entry. We find that, in the spirit of the literature on limit pricing, under certain circumstances even platforms find it profitable to exclude entrants if the fixed entry cost lies above a certain threshold. By studying the properties of the threshold, we show that the stronger the network externality, the lower the thresholds for which incumbent platforms find it profitable to exclude. We also find that entry deterrence is more likely to harm consumers the weaker are network externalities, and the more differentiated are the two platforms.
2 citations
01 Jan 2020
TL;DR: The authors provides an overview of the existing controls, focusing on the controls over contract terms in Singapore, including ex-ante legislative or administrative ones, or ex-post judicial ones, do not specifically target standard form contracts, B2C or B2B contracts, or even price terms.
Abstract: Singapore embraces ‘free market’ principles and the associated principle of ‘freedom of contract.’ Nevertheless, there are controls over contractual unfairness, be it procedural or substantive unfairness. This report provides an overview of the existing controls, focusing on the controls over contract terms in Singapore. Most of these controls, whether ex-ante legislative or administrative ones, or ex-post judicial ones, do not specifically target standard form contracts, B2C or B2B contracts, or even price terms. Where price or price related terms are concerned, the Singapore government relies mainly on ex-ante legislative (and administrative) rather than ex-post judicial control. Even then, it makes light use of ex-ante regulation to limit price terms, preferring to let price terms be regulated by market forces, with legislation or administrative regulations compelling disclosure in specific sectors of industries, while encouraging self-regulatory initiatives in others.
2 citations
Posted Content•
TL;DR: In this paper, the authors study dynamic signaling in a game of stochastic stakes, where each period, a privately informed agent of binary type chooses whether to continue receiving a return that is an increasing function of both her reputation and an exogenous, public stakes variable or to irreversibly exit the game.
Abstract: We study dynamic signaling in a game of stochastic stakes. Each period, a privately informed agent of binary type chooses whether to continue receiving a return that is an increasing function of both her reputation and an exogenous, public stakes variable or to irreversibly exit the game. A strong type is assumed to have a dominant strategy to continue. In the unique perfect Bayesian equilibrium, the weak type plays a mixed strategy that depends only on current stakes and their historical minimum, and she builds a reputation by continuing when the stakes reach a new minimum. We discuss various applications, including corporate reputation management, online vendor reputation, and limit pricing with stochastic demand.
1 citations
29 Dec 2020
TL;DR: In this article, the authors adopt an extended GBM model that considers bankruptcy risk and study its optimal limit price problem, which is a classical trading strategy for investing in stocks, and derive the explicit expressions of the expected discounted profit functions for sell and buy limit orders.
Abstract: In the Black and Scholes system, the underlying asset price model follows geometric Brownian motion (GBM) with no bankruptcy risk. While GBM is a commonly used model in financial markets, bankruptcy risk should be considered in the case of a severe economic crisis, such as that caused by the COVID-19 pandemic. The omission of bankruptcy risk could considerably influence the setting of a trading strategy. In this article, we adopt an extended GBM model that considers the bankruptcy risk and study its optimal limit price problem. A limit order is a classical trading strategy for investing in stocks. First, we construct the explicit expressions of the expected discounted profit functions for sell and buy limit orders and then derive their optimal limit prices. Furthermore, via sensitivity analysis, we discuss the influence of the omission of bankruptcy risk in executing limit orders.
1 citations
TL;DR: In this article, the authors present new evidence on wage and price setting based on a survey of more than 300 Uruguayan firms in 2013, finding that most of the firms set prices considering costs and adding a profit margin.
02 Oct 2020
TL;DR: In this article, the authors introduce ambiguity into an entry deterrence game between a better-informed established firm and a less informed potential entrant, in which the potential entrants has multiple priors on the true state of aggregate demand.
Abstract: In this paper, we introduce ambiguity into an entry deterrence game between a better-informed established firm and a less informed potential entrant, in which the potential entrant has multiple priors on the true state of aggregate demand. In this model, the established firm is also uncertain about the state but is informed of the distribution of the state. We characterize the conditions under which limit pricing emerges in equilibria, and thus ambiguity decreases the probability of entry. Welfare analysis shows that limit pricing is more harmful in a market with higher expected demand than in a market with lower expected demand.
TL;DR: In this paper, the behavior of a fossil fuel monopolist who faces demand from two regions: a 'climate club' and the'rest of the world' (ROW) is examined.