Limit price

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

The Relationship of Direct Price Flexibilities to Direct Price Elasticities

Abstract: In agricultural economics research, it is frequently easier to estimate direct and cross price flexibilities rather than price elasticities. However, elasticity estimates may be needed or wanted. The paper shows that, under rather general conditions, the reciprocal of the direct price flexibility is the lower absolute limit of the direct price elasticity. The departure of the true price elasticity from the flexibility reciprocal depends upon the strength of the cross effects of substitution and complementarity with other commodities.

Development of a hybrid model for electrical power spot prices

Abstract: In recent years a great deal of interest has been paid to the market-based pricing of electrical power. Electrical power contracts often contain embedded options, the valuations of which require a stochastic model for electricity prices. Successful stochastic models exist for modeling price variations in traditional commodities. Electricity is critically different from these commodities as it is difficult to store and, on short time scales, its price is highly inelastic. This has important implications for stochastic spot price models of electricity. Several stochastic models of electricity spot prices already exist. In these random models price retums play a dominant role. In this paper we lead a guided tour through existing electricity price data to motivate a new stochastic electricity price model that is different in that it directly models price. We apply the new model to the problem of pricing options on electrical power and discuss these preliminary results.

The Price of Simplicity

Abstract: We study revenue-maximizing pricing by a service provider in a communication network and compare revenues from simple pricing rules to the maximum revenues that are feasible. In particular, we focus on flat entry fees as the simplest pricing rule. We provide a lower bound for the ratio between the revenue from this pricing rule and maximum revenue, which we refer to as the price of simplicity. We characterize what types of environments lead to a low price of simplicity and show that in a range of environments, the loss of revenue from using simple entry fees is small. We then study the price of simplicity for a simple non-linear pricing (price discrimination) scheme based on the Paris Metro Pricing. The service provider creates different service classes and charges differential entry fees for these classes. We show that the gain from this type of price discrimination is small, particularly in environments in which the simple entry fee pricing leads to a low price of simplicity.

The demand for transportation fuels: imperfect price-reversibility?

Abstract: This paper examines the price-reversibility of fuel demand for road transport. The analysis is based on an econometric model which utilizes price-decomposition techniques to measure separately the effects of different types of price increases and decreases. The methods proposed allow empirical testing of irreversibility and certain forms of hysteresis in demand relationships. The results lend strong support to the notion that consumers do not necessarily respond in the same fashion to rising and falling prices, nor equivalently to sudden and substantial price rises as to minor price fluctuations: demand is not necessarily reversible to price changes. This finding severely challenges the equilibrium basis of the traditional, reversible demand model. In the particular example used, the results indicate that consumers have reacted more strongly to the price rises of the seventies, than to other price rises, and that the resulting fuel reductions will not be totally reversed as prices return to lower levels. The results also show that, if irreversibilities do exist, the use of reversible, symmetric models will produce biased elasticity estimates, not only for prices, but for other variables as well. The methods used in this analysis should be applicable to more detailed analysis of travel behaviour, where asymmetry of response or persistence of effect may be relevant. The existence of price asymmetries will have important implications for fuel use in transport, as well as for traffic growth, and particularly for evaluating the impact of price-related transport policy. It will also affect the possibility of estimating price elasticities and forecasting demand on the basis of historic data.