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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 article, the authors approximate price discrimination with marginal implicit prices of ticket restrictions that carriers typically use to price discriminate: Saturday-night stayover re-quirements and advanced-purchase discounts.
Abstract: We test the hypothesis that price discrimination increases with competition in the airline market. Using a large cross section of tickets offered by several carriers on various routes, we approximate price discrimination with marginal implicit prices of ticket restrictions that carriers typically use to price discriminate: Saturday-night stayover re-quirements and advanced-purchase discounts. We find that the restrictions are associated with lower airfares, but that the discounts are smaller on routes with higher market concentration. The results suggest that price dispersion attributed to ticket restrictions increases as markets becomemore competitive.
322 citations
TL;DR: This paper showed that productivity shocks are correlated with aggregate demand variables, implying that the former are not exogenous impulses and that firms persistently charge prices above marginal costs, making inappropriate the constant returns to scale competitive production function, assumed in many theoretical frameworks.
Abstract: In a recent article in this Journal, Hall (1988) examined productivity shocks at the industry level, derived from constant returns to scale production functions in which firms were assumed to be competitive. Hall had two important conclusions. First, he showed that productivity shocks (i.e., Solow residuals) were correlated with aggregate demand variables, implying that the former are not exogenous impulses. Second, his results implied that firms persistently charge prices above marginal costs, making inappropriate the constant returns to scale competitive production function, assumed in many theoretical frameworks. Because of the importance of Hall's findings, the article has led to many extensions. Evans (1992) confirms the empirical finding of significant correlations between productivity shocks and aggregate demand variables; Burnside, Eichenbaum, and Rebelo (1993) show that this correlation can be explained by introducing labor hoarding into a theoretical model with competitive firms and constant returns to scale production functions. The markups above marginal cost are explained by Eden and Griliches (1991) and Galeotti and Schiantarelli (1991) by modifying the theoretical production function. Caballero and Lyons (1992), using the Hall data and methodology, examine the possibility of external economies in the aggregate manufacturing production. Finally, Waldmann (199 1) argues in this Journal that the
321 citations
TL;DR: In this article, the effect of the price information problem on consumers' price perceptions is investigated, and an alternative hypothesis of average price perception is tested against the marginal price postulate which assumes wellinformed consumers.
Abstract: A bstract-Residential electricity consumption is an example of a good for which it is costly to determine marginal price, since price changes with the quantity purchased according to multistep block rate schedules. This paper investigates the effect of the price information problem on consumers' price perceptions. An alternative hypothesis of average price perception is tested against the marginal price postulate which assumes wellinformed consumers. The model, which includes a price perception variable, allows the estimation of the price to which consumers actually respond. The empirical results support the hypothesis that consumers respond to average price perceived from the electricity bill.
311 citations
TL;DR: In this article, the authors show that a significant stock price decrease is observed at the initial announcement of secondary distributions, and that price declines are greater for offerings by officers and directors and for larger offerings, but are significant for all types of sellers and for large and small offerings.
305 citations
TL;DR: In this paper, the authors investigate the impact of reference price effects on retailer price promotions and describe how retailers can estimate the optimal strategy of recurring promotions that maximizes profits from reference price effect over a time horizon.
Abstract: This paper investigates the impact of reference price effects on retailer price promotions and describes why these effects can make promoting profitable. First, we analyze the profit impact of reference price effects generated by a single period of promotion. The promotion can increase profit if the gain that these effects create in the promotion period outweighs the loss they create in future periods. We then describe how retailers can estimate the optimal strategy of recurring promotions that maximizes profits from reference price effects over a time horizon. Examples of such strategies are presented for a retailer selling a national brand of peanut butter. We obtain insights into how promotion prices, timing, and profits are affected by changes in costs, interest rates, consumers' reactions to reference price effects, and error in estimates used in the model. The retailer's optimal reaction to a trade deal is also examined. This strategy involves a phase of increased promotion activity sandwiched between phases of decreased activity. We explain these results using the effects described in the single-period model.
304 citations