Three Essays On Pricing Strategies
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Three Essays On Pricing Strategies
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Author : Fan Liu (Ph. D.)
language : en
Publisher:
Release Date : 2017
Three Essays On Pricing Strategies written by Fan Liu (Ph. D.) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2017 with categories.
Pricing is one of the most vital topic within the theory of Microeconomics. A firm can use a variety of pricing strategies to maximize its profit, gain market share, enter a new market or prevent potential entrants. This dissertation contains three essays exploring the equilibrium effect of various pricing strategies. The first chapter, co-authored with David S. Sibley and Wei Zhao, examines the effects of two types of vertical restrictions that are found in the cigarette and soft drink industries. In one case, a manufacturer gives discounts to the retailer in return for a commitment that the manufacturers product be priced no higher than a specified competing product. We refer to this as a vertical MFN (VMFN). The second is an agreement where the retailer commits to price in such a way that its margin on the product is no higher than the equivalent margin on a specified competing product. We refer to this as a vertical margin constraint (VMC). We show that the VMFN results in equilibrium prices that are higher than in a benchmark case without the constraint. In contrast, the VMC constraint leads to uniformly lower prices. The distributional effects are different, too. The VMFN tends to raise manufacturer profits, if different manufacturers produce very similar products. The retailer is worse off. The opposite effects arise in the VMC case. The second chapter analyzes firms giving switching discounts to consumers who purchased from their rivals rather than own past customers. By analyzing a two-period duopoly model with horizontal differentiation, we find that when the intrinsic value of the product is not high enough to make sure that the consumers will buy at least one of the product, the dynamic price path featured in the previous literature involving a raised second period price for customers with relatively high valuation will be reversed. Moreover, offering switching discounts results in a profit lower than the benchmark case, where such a pricing strategy is unavailable. The third chapter discusses how bundled discounts affect firm's decision of extending the product line by versioning the product through horizontal differentiation or vertical quality degrading. We propose a framework showing that inter-firm mixed bundling schemes may incentivize the introduction of a differentiated product, while in the absence of bundling it may not be profitable to do so. However, the consumer's surplus gain as a result of intensified competition and increased variety of goods from versioning will be dominated by the negative welfare impacts of bundling.
Three Essays On Distribution Channels And Pricing Strategy
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Author : Hongyan Shi
language : en
Publisher:
Release Date : 2011
Three Essays On Distribution Channels And Pricing Strategy written by Hongyan Shi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
This dissertation involves three essays, studying firms' decision-making on marketing mix variables. Specifically, the first essay (Chapter 2) studies the effects of distribution channels on firms' advertising content decision. In many markets, consumers may not have full information of product features and prices when they shop. While consumers can search to acquire such information, manufacturers and retailers often advertise price, product, or both types of information to help resolve consumers' uncertainty. This chapter studies manufacturers' and retailers' advertising content decisions in either a centralized channel or a decentralized channel, in a market where advertising affects consumers' search behaviors and purchase decisions. I show that in a decentralized channel, advertising may include more information than in a centralized channel. Specifically, when a retailer in a decentralized channel makes its advertising decision before the manufacturer and the retailer decide on prices, it prefers more price-product advertising than in a centralized channel; otherwise, it prefers more price-only advertising and more price-product advertising than in a centralized channel. I also show that in a decentralized channel where the manufacturer decides on product advertising and the retailer decides on price advertising, there will be more price-only advertising than in a centralized channel. Finally, I examine the consequent effects of advertising strategies in different distribution channels on channel members' profitability, consumer welfare and social welfare. The second essay (Chapter 3) studies the effects of channel structure and types of consumer heterogeneity on a manufacturer's product quality decision. I show that a manufacturer's product quality decision depends on both its channel structure and the type of consumer heterogeneity. When consumers are heterogeneous either vertically on their willingness-to-pay for product quality or horizontally on their transaction costs, a manufacturer will provide the same or lower product quality in a decentralized channel than in a centralized channel. However, when consumers are heterogeneous on both their willingness-to-pay for product quality and transaction costs, a manufacturer may even offer higher product quality in a decentralized channel than in a centralized channel under certain conditions, and consumers, as well as the distribution channel, can benefit from an increase of consumer transaction cost. The third essay (Chapter 4) studies how firms with high service quality (i.e. the high-type) can use tipping policy to signal their service quality and distinguish from firms with low service quality (i.e. the low-type) when consumers are comprised of informed and uninformed consumers. I characterize the conditions under which tipping policy together with complete information price can be effective signal device. In addition, I show that when the ratio of the informed consumers to uninformed consumers is low, if the high-type's optimal decision is to choose to have a tipping policy under complete information, it will signal with a tipping policy together with a distorted price. Furthermore, I show that even when the high-type's optimal decision is non-tipping policy under complete information, it might strategically adopt a tipping policy to signal its service quality.
Three Essays On Product Positioning And Pricing
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Author : Bin Shao
language : en
Publisher:
Release Date : 2008
Three Essays On Product Positioning And Pricing written by Bin Shao and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2008 with categories.
Three Essays On Pricing And Dynamic Control
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Author : Hyun-soo Ahn
language : en
Publisher:
Release Date : 2001
Three Essays On Pricing And Dynamic Control written by Hyun-soo Ahn and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2001 with categories.
Three Essays On Automobile Pricing
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Author :
language : en
Publisher:
Release Date : 2007
Three Essays On Automobile Pricing written by and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2007 with categories.
In North America, automobile prices are largely determined through negotiation. Recognizing that some consumers have a strong aversion to negotiation, some manufacturers and dealers are now offering consumers the option of buying cars at a "no-haggle", or fixed price. This dissertation consists of three essays which address how a fixed price alternative impacts both consumer behavior and firm strategies. The first essay explores the conditions under which a dealer would simultaneously offer a "no-haggle" Internet price and a negotiable price on the lot (which we term a dual-channel), and studies the marketing strategies adopted under this structure. We use consumer haggling cost as a key to understanding a dealer's choice of pricing strategy. We find that a dual-channel is optimal for the dealer when there is sufficient diversity in consumer haggling cost. We also find that it is optimal for a dealer to specify a higher-than-cost "minimum acceptable price" to the salesperson as a price floor for negotiations. Surprisingly, a dual-channel may serve fewer customers while still being more profitable than a single channel structure. The second essay examines the competitive implications of a no-haggle pricing policy. By using Toyota's fixed pricing policy in Canada as a natural experiment, we explore the impact of such a strategy on the prices and sales of Toyota and that of its close competitor, Honda. We find that the program has had important competitive consequences. While prices of both Toyota and Honda were higher in provinces with the program, there was an increase in Honda's sales but with no effect on the sales of Toyota. The third essay determines the impact of a consumer's bargaining behavior and information she collects on the final price paid. Using an extensive dataset, we find that a consumer's negotiation skill and attitude toward negotiating significantly influences the negotiation outcome. In particular, consumers that enjoy negotiating have a greater.
Three Essays On Imperfect Information And Market Pricing
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Author : Sneha Bakshi
language : en
Publisher:
Release Date : 2015
Three Essays On Imperfect Information And Market Pricing written by Sneha Bakshi and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2015 with Consumer behavior categories.
These essays examine how imperfect information amongst buyers in homogeneous goods markets affect sellers' incentives to compete, collude, and choose pricing rules. The first essay focuses on the price matching policy in a duopoly market when sellers have different marginal costs of production and some buyers know only one price in the market. It illustrates the incredibility of a seller price matching below its cost, which helps restore the low cost seller's incentive to price competitively, if the cost gap between the two sellers is large. Characterizing the equilibria of the model without price matching, I find that when the proportion of fully informed buyers is low, posting monopoly prices is the unique equilibrium. Market power of this kind is eliminated by price matching, because a seller adopting it promises to buyers unaware of its price to sell at their known price. Price matching thus reduces prices in equilibria if either the cost gap is large or if there are a large proportion of imperfectly informed buyers. The second essay investigates the endogenous choices of pricing rules by sellers with different costs in large markets, where buyers vary in their information regarding market prices. Inviting buyers to quote bids is ruled out because of adverse selection, and I find that price matching cannot be used by sellers with costs in the upper tail of the distribution of seller costs. The range of prices in equilibrium and the extent of the adoption of price matching to separate buyer types are found to depend on the price of the lowest cost seller in the market. The third essay examines how a distribution of imperfectly informed buyers affects (posted) price competition between identical sellers. I find that finite markets have multiple prices, as the only equilibrium is in mixed strategies with positive profits. The support of equilibrium prices is bounded below by a function of the size of the market, such that a larger market reduces profits. Only in the limit as the market becomes infinitely large, can a single price prevail, equaling marginal cost, where sellers earn zero profits.
Three Essays On Agricultural Price Volatility
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Author : Yiyong Yuan
language : en
Publisher:
Release Date : 2009
Three Essays On Agricultural Price Volatility written by Yiyong Yuan and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2009 with Agricultural prices categories.
The three essays of this dissertation cover issues of understanding and managing price uncertainty across the meat value chain and related futures market. The first essay discussed the implications of recent change in retailing industry's pricing strategy; the second essay described a State Space Model approach estimation of the joint distribution of cash-futures prices and a simulation-based Conditional-VaR approach determination of optimal futures exposure determination in contrast with minimum variance hedge ratio when preference free optimal hedge ratio does not exist; the third essay described the empirical changes in the hog price volatility summarized by a series of long memory GARCH model of the absolute return series in view of the recent industry structural change. The first essay investigated the impact of two coexisting retail price strategies for selling perishable products on the volatility of both the farm-level price and the retailer's margin. The two strategies included the traditional High-Low strategy and the Every-Day-Low-Price (EDLP) pricing strategy. In contrast to non-perishable consumer products, perishable products, which are often of very inelastic demand, obtain their price fluctuations mainly through supply side shocks. A two-retailer model was developed to examine the volatilities of grocery retailers' margin and producer price due to supply shocks for a perishable product. Results indicated a volatility difference exists between EDLP and High-Low retailers' marginal revenue when the two pricing strategies coexist, and as the market share of EDLP format increases this margin volatility difference deepens and farm-level price volatility also increases. The second essay proposed a state space model based estimation of the cash-futures price dependence relationship and a coherent C-VaR-approach optimal futures exposure determination based on simulated data in response to situations where the preference-free optimal hedge ratio no longer exists and the minimum variance hedge ratio is not appropriate. The State Space Model serves as an alternative method to other joint distribution estimation methods. The determined optimal futures exposure showed that the minimum variance hedge ratio discourages hedging. Parallel analyses using existing constant minimum conditional variance (MCV) hedge ratio models and a time-varying MCV ratio based on Multivariate GARCH models was also conducted for comparison. The C-VaR approach optimal futures position exposure reported different optimal futures positions for the "short hedge" and the "long hedge" situations. The third essay analyzed the historical change of the realized price volatility defined as the weekly hog price absolute return from 1973 to 2008 using long memory effect in the mean and variance process. The ARFIMA-FIGARCH/IGARCH Model results confirmed a significant long memory effect in the absolute return for a period around the end of the 1990s with documented structural change. I found no significant long memory effect for any other period. The model result also showed a significant ARCH-M effect that is explained as a fierce industry structural adjustment leading to a more dramatic price volatility change.
Three Essays On Retail Price Competition
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Author : Taehwan Kim (Ph.D. in Economics)
language : en
Publisher:
Release Date : 2018
Three Essays On Retail Price Competition written by Taehwan Kim (Ph.D. in Economics) and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2018 with categories.
This dissertation consists of three chapters. The first chapter examines price dispersion in retail gasoline and focuses on differentiation along the service dimension: full service versus self service. Consistent with more intensive search by self-service customers, I find that price dispersion always decreases with the number of nearby self-service stations, but does not decrease with the number of nearby full-service stations. When I segment the market by brand, I observe that the estimates are sensitive to how brands are separated into different types. These findings show that the market is more clearly segmented by service level than by brand type and also highlight the importance of product differentiation when modeling price dispersion. In the second chapter, I examine product positioning and pricing strategies of sellers in a market undergoing a significant restructuring using data from the introduction of self-service technology in the Korean gasoline market in the 2000s. I show that the decision of full-service sellers to exit or switch to self service is positively correlated with the intensity of competition they face. The pricing strategies of sellers differ by product position: self-service sellers compete for price-sensitive consumers, whereas full-service sellers differentiate their product by offering a variety of bundled products and services, such as coffee, carwash or even a nail salon, to compete for less-price-sensitive consumers. Taken together, these patterns have led to an increase in the full-service premium during the market transition. In the third chapter, I study the effect of a government contract on price. Since 2013, Korean government officials have been required to refuel at contracted gasoline stations, at about 5% discounts relative to the posted price. The initial contract terminated in November 2015 and a new group of sellers took over the contract. In this paper, I use this natural experiment to examine the impact of the government contract on gasoline prices, using a difference-in-difference analysis and price data on all gasoline stations in Seoul. I find that, all else equal, posted prices of contracted gasoline stations are about 2% higher than those of non-contracted stations. This finding is consistent with the prediction of models of price discrimination that prices decrease when the elasticity of demand falls. The effect on prices is not uniform across all stations, however. The contract leads to larger increases in full-service stations' posted prices than in self-service stations' prices, and larger increases at stations with fewer nearby competitors. The contract also decreases prices of non-contracted stations very close to contracted stations.
Three Essays On Pricing And Hedging In Incomplete Markets
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Author : Dan Chen
language : en
Publisher:
Release Date : 2011
Three Essays On Pricing And Hedging In Incomplete Markets written by Dan Chen and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2011 with categories.
The thesis focuses on valuation and hedging problems when the market is incomplete. The first essay considers the quadratic hedging strategy. We propose a generalized quadratic hedging strategy which can balance a short-term risk (additional cost) with a long-term risk (hedging errors). The traditional quadratic hedging strategies, i.e. self-financing strategy and risk-minimization strategy, can be seen as special cases of the generalized quadratic hedging strategy. This is applied to the insurance derivatives market. The second essay compares parametric and nonparametric measure-changing techniques. The essay discusses three pricing approaches: pricing via Esscher measure, via calibration and via nonparametric risk-neutral density; and empirically compares the performance of the three approaches in the metal futures markets. The last essay establishes the concept of stochastic volatility of volatility and proposes several estimation methods.
Three Essays On Price Setting And Monetary Policy
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Author : Heike Schenkelberg
language : en
Publisher:
Release Date : 2012
Three Essays On Price Setting And Monetary Policy written by Heike Schenkelberg and has been published by this book supported file pdf, txt, epub, kindle and other format this book has been release on 2012 with categories.