Limit price

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

Housing supply, land costs and price adjustment

Abstract: We analyze relationships between housing supply elasticities, land costs and house price dynamics, contributing three main insights. First, higher housing supply elasticities help contain short-run price spikes following demand shocks. Second, land price dynamics influence this relationship; supply responses are lessened and house price spikes are exacerbated as land prices increase. Third, we estimate a system of regional equations modeling housing supply using a Tobin's-q specification (incorporating construction and land costs) and show that regional price dynamics are a function of the region's supply elasticity.

Price Commitments with Strategic Consumers: Why It Can Be Optimal to Discount More Frequently ' Than Optimal

Abstract: In many markets consumers incur search costs, and firms choose a long-run pricing strategy that determines how they respond to market conditions. A pricing strategy may involve commitments to take actions that do not optimize short-term revenue given the information the firm learns about demand. For example, as already suggested in the literature, the firm could commit to a single price no matter whether demand is strong or weak. We introduce a new strategy-charge a "high" price only if demand is indeed "high," otherwise offer a discount. This strategy discounts more frequently than would maximize revenue conditional on demand. Nevertheless, the frequent discounts attract consumers. We show that i the discount-frequently strategy is optimal whether capacity is adjustable or not, ii discount-frequently is often much better than other pricing strategies, especially if no price commitment is made, and iii "overbuying" capacity e.g., inventory to attract consumers by signaling availability and the likelihood of discounts is a poor strategy. Contrary to some recommendations in the literature to limit markdowns and to purchase ample capacity, our results provide support for a strategy that embraces frequent discounts and moderate capacity.

Competition in European Aviation: Pricing Policy and Market Structure

Abstract: The purpose of this paper is to analyze the impact of liberal bilateral agreements on some European air routes in terms of price competition and market structure. The author proposes a model that explains firms' behavior and shows that, after the liberalization, firms exploit their cost advantages and differentiate their products more but market structure still depends on access to airport facilities and other ancillary services controlled by the flag carriers. These results differ from American evidence in that the author finds that the effect of airport presence on prices through lower costs more than offsets the effect through higher perceived quality. Copyright 1995 by Blackwell Publishing Ltd.

A newsvendor pricing game

Abstract: This paper considers a horizontal market of multiple firms that face stochastic price-dependent demand. The firms make joint pricing/inventory decisions and use price to compete for market demand. With fairly general demand models that are price-dependent, stochastic, and substitutable among firms, we prove the existence and uniqueness of the pure-strategy Nash equilibrium. The market at the equilibrium exhibits a bias toward under-pricing caused by competition; specifically, raising prices at any equilibrium of the game increases the total system profit, and at any joint-optimal set of pricing levels each self-interested firm has an incentive to lower its price. This result closely parallels that obtained in the inventory competition games in which prices are fixed and the bias is toward overstocking.