Limit price

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

Equilibrium price dispersion under demand uncertainty: the roles of costly capacity and market structure

Abstract: When capacity is costly and prices are set in advance, firms facing uncertain demand will sell output at multiple prices and limit the quantity available at each price. I show that the optimal price strategy of a monopolist and the unique pure-strategy Nash equilibria of oligopolists both exhibit intrafirm price dispersion. Moreover, as the market becomes more competitive, prices become more dispersed, a pattern documented in the airline industry. While generating similar predictions, the model differs from the revenue management literature because it disregards market segmentation and fare restrictions that screen customers.

Frequency of Price Adjustment and Pass-Through

Abstract: We empirically document using U.S. import prices that on average goods with a high frequency of price adjustment have a long-run pass-through that is at least twice as high as that of low-frequency adjusters. We show theoretically that this relationship should follow because variable mark-ups that reduce long-run pass-through also reduces the curvature of the proflt function when expressed as a function of the cost shocks, making the flrm less willing to adjust its price. Lastly, we quantitatively evaluate a dynamic menu-cost model and show that the variable mark-up channel can generate signiflcant variation in frequency, equivalent to 37% of the observed variation in the data. On the other hand the standard workhorse model with constant elasticity of demand and Calvo or state dependent pricing has di‐culty matching the facts.

Price uncertainty, utility, and industry equilibrium in pure competition*

Abstract: THE NEOCLASSICAL THEORY of the firm assumes that the entrepreneur behaves as if his demand curve, production function, and factor costs are known with certainty. Although it is recognized that the firm may be uncertain about the form of these functions, the entrepreneur is assumed to compress his judgments about a function into a best estimate. He then behaves as if the best estimate represents the function with certainty. The formal consideration of uncertainty about the functions, however, can significantly qualify the results of neoclassical theory. The purpose of this article is to extend the traditional deterministic model of the firm to the situation in which the price for the firm's product is a random variable. The analysis of this situation is important not only 1Qecause of the generalization of the traditional model, but because it introduces additional considerations, such as attitudes toward risk, that may help to litter explain observed behavior. A number of authors 'have investigated various aspects of the static theory of the firm under demand uncertainty and their major results will be briefly discussed here. Their models can be differentiated by the competitiveness of the economic environment assumed, the nature of the demand uncertainty, and by the behavioral assumptions employed. The models of purely competitive firms will be discussed first and then models of firms in imperfect competition will be considered. Uncertainty is usually introduced into a model of pure competition by assuming that price is uncertain and that the firm can sell any quantity at the price that obtains in the market. Oi [15] assumed that the firm was able to observe price prior to determining output or equivalently that the firm could instantaneously adjust output. With this assumption and an objective of maximizing( expected profit the firm produces such that price and marginal cost are equated as in deterministic theory. Oi was concerned with the desirability of price uncertainty and demonstrated that expected profit exceeds the profit that would be obtained with a certain price which is equal to the expected price. He also demonstrated that the firm prefers increased variability of price in certain cases and extended the analysis to the case of a firm with nonlinear risk preferences.2 Nelson [13] presumed that the firm makes its output decision prior to ob

Factors influencing the price premiums that consumers pay for national brands over store brands

Abstract: Identifies some managerially relevant factors that influence the size of the price premium that consumers will pay for national brands over store brands in grocery products. We define price premium as the maximum price consumers will pay for a national brand over a store brand, expressed as the proportionate price differential between a national brand and a store brand. Overall, perceived quality differential accounts for about 12 percent of the variation in price premiums across consumers and product categories and is the most important variable influencing price premiums.

Stock market prices and volumes of sales

Abstract: or vice versa will inevitably yield incomplete if not erroneous results. SUMMARY THE PRESENT investigation is a part of a study of the stock market which is motivated by three basic considerations: (1) Existing demand theory is inadequate for analyzing the problem of speculative prices and thus incapable of providing a valid prediction theory for this type of price mechanism. (2) The volume of sales in a commodity market has an economic significance in its own right and thus deserves much more attention by economists than it has received so far. (3) Prices and volumes of sales in the stock market arejoint products of a single market mechanism, and any model that attempts to isolate prices from volumes or vice versa will inevitably yield incomplete if not erroneous results. While the theoretical model and its implications will be presented elsewhere, the empirical results reported here serve as a basis for the proposed theory. Among the significant results so far found are: (1) A small volume is usually accompanied by a fall in price. (2) A large volume is usually accompanied by a rise in price. (3) A large increase in volume is usually accompanied by either a large rise in price or a large fall in price. (4) A large volume is usually followed by a rise in price. (5) If the volume has been decreasing consecutively for a period of five trading days, then there will be a tendency for the price to fall over the next four trading days.