Limit price

About: Limit price is a research topic. Over the lifetime, 4865 publications have been published within this topic receiving 148546 citations.

A Survey on the Economics of Behaviour-Based Price Discrimination

Abstract: Economists have long been interested in understanding the profit, consumer surplus and welfare effects of an ancient marketing strategy: Price Discrimination. While it is not new that firms try frequently to segment customers in order to price discriminate, what has dramatically changed, with recent advances in information technologies, is the quality of consumer-specific data now available in many markets and how this information has been used by firms for price discrimination purposes. Specifically, thanks to information technology it is nowadays increasingly feasible for sellers to segment customers on the basis of their purchasing histories and to price discriminate accordingly. This form of price discrimination has been named in the literature as Behaviour-Based Price Discrimination (BBPD). For a long time economists have been concerned in understanding the economic effects of price discrimination in monopolistic markets. However, because imperfect competition is undoubtedly the most common economic setting, recent research on the field has been concerned with the following issues. Firstly, how are profit, consumer surplus and welfare affected when firms practice some form of price discrimination in imperfectly competitive markets? Secondly, in which circumstances may competitive firms have an incentive to price discriminate or rather to avoid it? As we will see, conclusions regarding the profit and welfare effects of price discrimination are strongly dependent upon the form of price discrimination, which in turn depends upon the form of consumer heterogeneity and the different instruments available for price discrimination. Basically, the aim of this survey is to clarify the two aforementioned issues in imperfectly competitive markets.

Joint pricing and advertising strategy with reference price effect

Abstract: Consumers are susceptible to reference price effects when they make purchase decisions for a certain product. Meanwhile, the sales price and advertisement are the determinable factors that have impact on consumers’ reference price which are also fundamental marketing strategies. Therefore, how to determine an appropriate sales price and advertising effort level to maximise firms’ profits is an essential task. A joint pricing and advertising problem for a monopolistic firm with consideration of reference price effect is investigated, where consumer demand rate is price-sensitivity and depends on the gap between the sales price and the reference price in consumers’ mind. An optimisation model is established to maximise the firm’s total profit by making a joint pricing and advertising strategy. The static and dynamic joint strategies are obtained by applying Pontryagin’s maximum principle. Results show that the dynamic strategies dominate the static ones. Furthermore, the dynamic pricing and dynamic advertis...

Optimal design of subsidy to stimulate renewable energy investments: The case of China

Abstract: This paper proposes a real options model for estimating the optimal subsidy for renewable energy power generation project by using stochastic process to describe the market price of electricity, CO2 price and investment cost. Two indicators, i.e., project value and threshold value, are used to derive the optimal subsidy. The least squares Monte Carlo simulation method is used to solve the model. The proposed model is used to empirically evaluate the optimal level of subsidy for solar photovoltaic power generation in China. The results show that carbon emission trading scheme helps reduce subsidy. Unit generating capacity, market price of electricity, CO2 price and the volatility of investment cost are negatively related with subsidy, whereas investment cost and the volatility of electricity price and CO2 price are positively related with subsidy. It is suggested that Chinese governments take some measures, e.g., promoting technological progress, establishing a nationwide carbon emission trading market, promoting the competition in renewable energy industry as well as maintaining the stability of CO2 price and electricity price, to reduce the required subsidy.