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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: This article developed a model where consumers care about the fairness of prices and react negatively only when they become convinced that prices are unfair, which leads to price rigidity, though the implications of the model are not identical to those of existing models of costly price adjustment.
Abstract: While much evidence suggests tha price rigidity is due to a concern with the reaction of customers, price increases do not seem to be typically associated with drastic reduction in purchases. To explain this apparent inconsistency, this paper develops a model where consumers care about the fairness of prices and react negatively only when they become convinced that prices are unfair. This leads to price rigidity, though the implications of the model are not identical to those of existing models of costly price adjustment. In particular, the frequency of price adjustment ought to depend on economy-wide variables observed by consumers. As I show, this has implications for the effects of monetary policy. It can, in particular, explain why inflation does not fall immediately after a monetary tightening.
51 citations
TL;DR: A new model for revenue management of product sales that incorporates both dynamic pricing and a price guarantee is presented that can be used for pricing any items with limited availability over a fixed time horizon.
Abstract: We present a new model for revenue management of product sales that incorporates both dynamic pricing and a price guarantee. The guarantee provides customers with compensation if, prior to a fixed future date, the price of the product drops below a level specified at the time of purchase. We consider the problem of simultaneously determining optimal dynamic price and guarantee policies for items from a fixed stock when demand depends both on the price and on the parameters of the price guarantee. The model can be used for pricing any items with limited availability over a fixed time horizon. We formulate this model as a discrete-time optimal control problem, prove the existence of its optimal solution, explore some of the structural properties of the solution, present lower-bounding heuristics for solving the problem, and report numerical results.
51 citations
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08 Feb 2013TL;DR: In this article, the authors apply demand estimation techniques to individual level data to construct a constant-quality price index for anti-cholesterol drugs and find that the constant quality price index drops by 27 percent, a pace more in line with their expectations in such a dynamic segment of the industry.
Abstract: The pharmaceutical industry is characterized as having substantial investment in R&D and a large number of new product introductions, which poses special problems for price measurement caused by the quality of drug products changing over time. This paper applies recent demand estimation techniques to individual level data to construct a constant-quality price index for anti-cholesterol drugs. Although the average price for anti-cholesterol drugs does not change over the sample period, I …nd that the constant-quality price index drops by 27 percent, a pace more in line with our expectations in such a dynamic segment of the industry.
50 citations
TL;DR: A user-cost model is used to study how dispersed information affects the equilibrium house price and it is shown that pessimistic expectations are not incorporated in the price of owned houses and the equilibrium price is higher and more volatile relative to the benchmark case of common information.
50 citations
Posted Content•
TL;DR: In this article, the authors examined price discrimination in a market where consumers learn their preferences over time and found that there is more price discrimination under duopoly than under monopoly, consistent with recent empirical evidence from the U.S. airline industry.
Abstract: This paper examines price discrimination in a market where consumers learn their preferences over time. The products are perfect substitutesex ante, but there is horizontal differentiationex post. Air travel provides one example of such a market. In equilibrium, there is more price discrimination under duopoly than under monopoly, which is consistent with recent empirical evidence from the U.S. airline industry.
50 citations