Limit price

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

Price Asymmetry in Energy Demand Models: A Proxy for Energy-Saving Technical Change?

Abstract: It has become fashionable to believe that energy and oil demand respond asymmetrically to price increases and decreases. Unfortunately, the asymmetric price model utilized by Gately and others has the unintended by-product of producing intercept shifts in the demand function purely in response to price volatility. Thus what is in fact energy saving technical change is attributed to price asymmetry. The two become observationally equivalent. Furthermore, the asymmetric price model has the peculiarity of being dependent on the starting point of the data period so that parameter estimates are not robust across different sample periods. We demonstrate empirically using a panel of OECD countries for oil and energy demand that symmetric price responses cannot be rejected after explicitly controlling for energy saving technical change within a fixed effects model.

Bertrand-Edgeworth duopoly with unit cost asymmetry

Abstract: This paper characterizes the set of Nash equilibria in a price setting duopoly in which firms have limited capacity, and in which unit costs of production up to capacity may differ. Assuming concave revenue and efficient rationing, we show that the case of different unit costs involves a tractable generalization of the methods used to analyze the case of identical costs. However, the supports of the two firms' equilibrium price distributions need no longer be connected and need not coincide. In addition, the supports of the equilibrium price distributions need no longer be continuous in the underlying parameters of the model. As an application of our characterization, we examine the Kreps-Scheinkman model of capacity choice followed by Bertrand-Edgeworth price competition and show that, unlike in the case of identical costs, Cournot equilibrium capacity levels need not arise as subgame-perfect equilibria. The low-cost firm has greater incentive to price its rival out of the market than exists under Cournot behavior.

E-commerce volume pricing

Abstract: In the volume pricing methodology, a seller initially establishes a price structure for a product which provides for lower prices as larger quantities of the product are purchased. The price structure is electronically made available to potential buyers of the product. For example, the price structure may be displayed on an Internet site. The sellers further establish an “open session” period during which orders for the product are accepted. During the open session period, multiple buyers are able to place orders for the product up to a maximum available quantity. At the end of the open session, the total quantity of products collectively ordered by all of the buyers is calculated. Based on the total quantity ordered, the final price to all buyers is the lowest price provided from the price structure regardless of whether the lowest price had been reached at the time a particular buyer placed their order during the open session.

Quality and Location Choices under Price Regulation

Abstract: In a model of spatial competition, we analyze the equilibrium outcomes in markets where the product price is exogenous. Using an extended version of the Hotelling model, we assume that firms choose their locations and the quality of the product they supply. We derive the optimal price set by a welfarist regulator. If the regulator can commit to a price prior to the choice of locations, the optimal (second-best) price causes overinvestment in quality and an insufficient degree of horizontal differentiation (compared with the first-best solution) if the transportation cost of consumers is sufficiently high. Under partial commitment, where the regulator is not able to commit prior to location choices, the optimal price induces first-best quality, but horizontal differentiation is inefficiently high.