Topic
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 article, the authors re-examine the economic justification for the regulation of firms' price policies and show that product variety is determined by the degree of spatial contestability of the market and whether firms are free to price discriminate.
Abstract: We re-examine the economic justification for the regulation of firms' price policies. Existing analysis of the relative benefits of alternative pricing policies, by treating market structure as exogenous, loses an important trade-off. Price deregulation leading to, for example, discriminatory pricing, on the one hand, enhances competition between incumbents but, on the other, acts as a strong deterrent against entry. We illustrate this trade-off by analysing the familiar address model of product differentiation and show that product variety is determined by the degree of spatial contestability of the market (the ability of entrants to make binding location commitments) and by whether firms are free to price discriminate. Copyright 1996 by Royal Economic Society.
44 citations
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TL;DR: In this article, a finite mixture model is used to estimate farm-retail price transmission in the US fresh strawberry market, and two distinct pricing regimes associated with off-and peak-harvesting seasons are found.
Abstract: A finite mixture model is used to estimate farm–retail price transmission in the US fresh strawberry market. Results suggest two distinct pricing regimes associated with off- and peak-harvesting seasons. The market power parameter is significant in the peak-harvest regime, but not in the off-peak regime. Moreover, price changes are transmitted completely throughout the marketing channel in the off-peak regime when the market power parameter is zero, but not in the peak-harvest regime when the market power parameter is positive. This suggests that produce buyers are more apt to exercise market power when farm supplies are abundant than when they are scarce, and that the exercise of such power causes the farm–retail price linkage to become asymmetric.
44 citations
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TL;DR: In this paper, the authors consider a situation in which shippers can purchase ocean freight services either directly from a carrier (service provider)in advance or from the spot market just before the departure of an ocean liner.
Abstract: We consider a situation in which shippers (customers) can purchase ocean freight services either directly from a carrier (service provider)in advance or from the spot market just before the departure of an ocean liner. The price is known in the former case, while the spot price is uncertain ex-ante in the latter case. Consequently, some shippers are reluctant to book directly from the carrier in advance unless the carrier is willing to “partially match” the realized spot price when it is lower than the regular price. This study is an initial attempt to examine if the carrier should bear some of the “price risk” by offering a “fractional” price matching contract that can be described as follows. The shipper pays the regular freight price in advance; however, the shipper will get a refund if the realized spot price is below the regular price, where the refund is a “fraction” of the difference between the regular price and the realized spot price. By modeling the dynamics between the carrier and the shippers as a sequential game, we show that the carrier can use the fractional price matching contract to generate a higher demand from the shippers compared to no price matching contract by increasing the “fraction” in equilibrium. However, as the carrier increases the “fraction,” the carrier should increase the regular price to compensate for bearing additional risk. By selecting the fractional price matching contract optimally, we show that the carrier can afford to offer this price matching mechanism without incurring revenue loss: the optimal fractional price matching contract is “revenue neutral.”
44 citations
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TL;DR: In this article, the authors found that an oil price shock in interaction with a firm's stock price volatility has a negative effect on investment by that firm, both in the short and long-term.
Abstract: It is found that an oil price shock in interaction with a firm’s stock price volatility has a negative effect on investment by that firm, both in the short and long-term. In the presence of this interaction term, linear variables in oil price shocks are not statistically significant. There is evidence that for the short-term effects of the interaction variable, the particular magnitude of an oil price shock may not be as important as the fact that there is an oil price shock. For the long-term effects, however, the magnitude of the oil price shock does matter. Over a longer horizon, oil price shocks depress investment more at firms facing greater uncertainty. An increase in firm stock price volatility continues to reduce the link between sales growth and investment in the presence of oil price shocks as in Bloom et al. (2007).
44 citations