Limit price

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

Price discrimination in E-commerce? an examination of dynamic pricing in name-your-own price markets

Abstract: The enhanced abilities of online retailers to learn about their customers' shopping behaviors have increased fears of dynamic pricing, a practice in which a seller sets prices based on the estimated buyer's willingness-to-pay. However, among online retailers, a deviation from a one-price-for-all policy is the exception. When price discrimination is observed, it is often in the context of customer outrage about unfair pricing. One setting where pricing varies is the name-your-own-price (NYOP) mechanism. In contrast to a typical retail setting, in NYOP markets, it is the buyer who places an initial offer. This offer is accepted if it is above some threshold price set by the seller. If the initial offer is rejected, the buyer can update her offer in subsequent rounds. By design, the final purchase price is opaque to the public; the price paid depends on the individual buyer's willingness-to-pay and offer strategy. Further, most forms of NYOP employ a fixed threshold price policy. In this paper, we compare a fixed threshold price setting with an adaptive threshold price setting. A seller who considers an adaptive threshold price has to weigh potentially greater profits against customer objections about the perceived fairness of such a policy. We first derive the optimal strategy for the seller. We analyze the effectiveness of an adaptive threshold price vis-a-vis a fixed threshold price on seller profit and customer satisfaction. Further, we evaluate the moderating effect of revealing the threshold price policy (adaptive versus fixed) to buyers. We test our model in a series of laboratory experiments and in a large field experiment at a prominent NYOP seller involving real purchases. Our results show that revealing the usage of an adaptive mechanism yields higher profits and more transactions than not revealing this information. In the field experiment, we find that applying a revealed adaptive threshold price can increase profits by over 20 percent without lowering customer satisfaction.

Volatility, price resolution, and the effectiveness of price limits

Abstract: Following the market crash in 1987, there has been increased interest in the usefulness of price limits as well as other forms of market controls. The purpose of this research is to investigate price limits and the empirical behavior of futures prices for a selected group of commodities around price limits. For the group of commodities examined in this research, the empirical results show that for the time periods analyzed, in general: 1 The period of time immediately preceding limit moves is characterized by major changes in the direction of the limit price while following the limit move; prices tend to either stabilize or reverse directions, thus suggesting that price limits may provide a cooling-off period for the market. 2 Price limits also appear to be accompanied by substantial reductions in volatility. This attenuation of volatility in the post-limit period and the maintenance of volume in the post-limit period tend to suggest that liquidity may not be severely impaired by the limit move process.

The pricing behaviour of italian firms: new survey evidence on price stickiness

Abstract: This study examines price setting behaviour of Italian firms on the basis of survey data. Prices are mostly fixed following mark-up rules, although customer-specific characteristics have a role in some sectors. Rival prices mostly affect price strategies of industrial firms. In reviewing their prices, firms follow either state-dependent rules or a combination of time and state-dependent ones. A considerable degree of price stickiness emerges; in 2002 most firms changed their price only once. Three explanations are ranked highest: explicit contracts, tacit collusive behaviour and the temporary nature of the shock. Prices respond asymmetrically to shocks, depending on the direction of the required adjustment and the source of the shock. Real rigidities play an important role in determining this asymmetry. Cost shocks impact more when prices have to be raised than when they have to be reduced; demand decreases are more likely to induce a price change than demand increases.