Limit price

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

On investment decisions in liberalized electricity markets: the impact of price caps at the spot market

Abstract: We analyze the impact of a uniform price cap at electricity spot markets on firms investment decisions and on welfare. Since investment decisions for those markets are taken in the long run, fluctuating demand at the spot market eventually gives rise to high price spikes in case of binding capacities. Those price spikes are considered to send accurate signals for investment in generation capacities, limiting those spikes by price caps is thought to reduce firms' investment incentives. We are able to show that this is not true for the case of strategic investment behavior. More specifically we analyze a market game where firms choose capacities prior to a spot market which is subject to fluctuating or uncertain demand. We derive, that appropriately chosen price caps do always increase firms investment incentives under imperfect competition. We furthermore characterize the optimal price cap. Based on the theoretical framework, we empirically analyze the impact of uniform price caps on the German electricity market.

The Two Price Systems in the Copper Industry

Abstract: During three periods from the end of World War II through 1970, some or all of the major copper producers held their price below the level that would have cleared the market and rationed their "available supplies." The central question posed by the two price systems is that of why any of the major producers would ever choose to ration. Bound up with this issue is the question of why several of the major producers rationed at times when the others did not. Two circumstances in which rationing may be profitable are identified. First, it is shown that rationing may be a profitable response to a large, unanticipated increase in demand if there is long-run substitution in demand; capacity cannot be quickly expanded; marginal cost is increasing; and price discrimination is infeasible. Second, it is shown that a partially integrated copper producer may find rationing profitable as a means of partially achieving the effects of price discrimination given that price discrimination itself is infeasible. Taken together, these motives for rationing provide an internally consistent set of hypotheses that account for the broad features of the two price systems. It is suggested on the basis of structural characteristics of the industry that these hypotheses are valid. However, the argument is not conclusive, so it can be claimed only that the results obtained provide a plausible explanation of the two price systems.

Strategic Competition and the Persistence of Dominant Firms: a Survey

Abstract: In the struggle to create, maintain and expand favourable market positions, firms’ actions are intended not only to affect the current conduct of rivals directly, but also to have an indirect effect by altering market structure in a way which constrains the rival’s subsequent actions. In this dynamic process, market strategies or conduct (the control variables) interact with market structure (the state variable); and current conduct can become embedded in future market structure through strategic investments made by firms to bar entry and reduce intra-industry mobility. (For an analysis of this view of industry dynamics, see Jacquemin, 1972; Caves, 1976, Part I; Caves and Porter, 1977; Spence 1981a, p. 51; and Stiglitz, 1981, p. 187). Of course, not all investments made by firms have the intended effect on market structure, and the purpose of this survey is to consider a recent body of literature which has devoted itself to precisely this point.1 This work is of interest because of the new light it has shed on the combined structural and strategic origin of market power; that is, on the hoary question of the persistence and profitability of dominant firms (compare Posner, 1972, p. 130 with Williamson, 1975, p. 218 for contributions to this old debate). The literature seems to have coalesced around two basic types of model.

Limits to Growth in Organic Sales

Abstract: The price gap between organic and conventional food might explain the low market share of organics in the Netherlands. A real-life experiment was carried out in 2006 in order to determine the price sensitivity of consumer demand for organics. Consumer prices of selected organic products were reduced by up to 40% below current market levels. The price elasticity of demand was low, because not all consumers perceived the price reductions. Moreover, the offer of organic varieties is limited, as is the consumer’s willingness to pay for the social attributes of organics.

Target pricing method

Abstract: A method and process of target pricing a value, such as a bid, or other price which includes the steps of pricing the value using stored list prices in a product model, costing the value using stored costs in the product model, calculating. an equivalent competitor net price for the value using a competitor net price model, calculating. the probability of winning the value as a function of price using parameters from a market response model, and calculating a target price for the value. The preferred target price maximizes expected contribution using an optimization model that determines competitive response to any potential value, or bid. The method and process further preferably include the steps of calculating one or more benefits of target pricing in comparison to a pre-existing pricing approach, determining a target range for the target price to be within, and determining strategic objects that constrain the target price of the value or bid.