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Limit price
About: Limit price is a research topic. Over the lifetime, 4865 publications have been published within this topic receiving 148546 citations.
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TL;DR: In this paper, a game based on the Bertrand duopoly model is constructed to study the effects of price guarantee policies, where a firm can make a binding commitment to match or beat its competitor's price.
Abstract: A game based on the Bertrand duopoly model is constructed to study the effects of price guarantee policies. Before it chooses a list price, a firm can make a binding commitment to match or beat its competitor's price. The effectiveness of these price guarantee policies in facilitating price collusion depends on the solution concept used. Furthermore, there exists an equilibrium in which neither firm offers any price guarantees and each firm sets price equal to marginal cost.
59 citations
TL;DR: In this article, the authors examine three managerial price-setting practices for new products, i.e., value-informed, competition-informed and cost-informed pricing, and provide insights that may help explain the growth of new products and address the problems of underpricing.
59 citations
TL;DR: In this article, the impact of supply responsiveness on price dynamics in regional housing markets is examined, showing that regions with high supply responsiveness have relatively small price spikes following demand shocks, consistent with a rational response that limits house price jumps in regions with strong supply responses.
Abstract: We analyse two inter-related features of regional housing markets: determinants of new housing supply, and the impact of supply responsiveness on price dynamics. We demonstrate that a suitably specified q-theory model (including residential land values as well as construction costs) explains intended housing starts. Few prior studies have found significant land price effects, due either to their omission or (possibly) to incorrect data definition (use of agricultural rather than residential land values). We examine the interaction of supply responsiveness and price adjustment following demand shocks, using a new panel dataset covering 53 quarters across 73 regions of New Zealand. Regions with high supply responsiveness have relatively small price spikes following demand shocks, consistent with a rational response that limits house price jumps in regions with strong supply responses.
58 citations
TL;DR: In this article, conditions for spatial price equilibrium are derived for a set of firms in oligopolistic spatial competition, distributed at fixed locations in a heterogeneous region where consumer purchasing patterns are a probabilistic function of the price distribution rather than a deterministic function of proximity to firms.
Abstract: . Conditions for spatial price equilibrium are derived for a set of firms in oligopolistic spatial competition, distributed at fixed locations in a heterogeneous region where consumer purchasing patterns are a probabilistic function of the price distribution rather than a deterministic function of proximity to firms. The resulting prices vary with accessibility to consumers or with the degree of local spatial monopoly, and result in non-zero profits for firms. Conditions describing the existence and stability properties of this spatial price equilibrium are defined, and are shown to be equivalent for two different hypotheses concerning disequilibrium pricing behavior: a partial price adjustment model and a Bertrand game. For two different profit goals, total profit maximization and profit rate maximization, it is shown that a spatial price equilibrium exists and is at least locally quasi-stable.
58 citations
TL;DR: In 2003, the Norwegian government implemented a price regulation scheme on a selection of drugs subjected to generic competition, where the retail price cap, termed the index price, was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin this paper.
Abstract: In March 2003 the Norwegian government implemented yardstick-based price regulation schemes on a selection of drugs subjected to generic competition. The retail price cap, termed the “index price,” on a drug (chemical substance) was set equal to the average of the three lowest producer prices on that drug, plus a fixed wholesale and retail margin. This is supposed to lower barriers of entry for generic drugs and to trigger price competition. Using monthly data over the period 1998–2004 for the six drugs (chemical entities) included in the index price system, we estimate a structural model enabling us to examine the impact of the reform on both demand and market power. Our results suggest that the index price helped to increase the market shares of generic drugs and succeeded in triggering price competition.
58 citations