optimal dynamic pricing of inventories with stochastic demand over finite horizons in many industries managers face the problem of selling a given stock of items by a deadline we investigate the problem of dynamically pricing such inventories when demand is price sensitive and stochastic and the firm s objective is to maximize expected revenues examples that fit this framework include retailers selling fashion and seasonal goods and the travel and leisure industry which markets space such as seats on airline flights cabins on vacation cruises and rooms in hotels that become worthless if not sold by a specific time we formulate this problem using intensity control and obtain structural monotonicity results for the optimal intensity resp price as a function of the stock level and the length of the horizon for a particular exponential family of demand functions we find the optimal pricing policy in closed form for general demand functions we find an upper bound on the expected revenue based on analyzing the deterministic version of the problem and use this bound to prove that simple fixed price policies are asymptotically optimal as the volume of expected sales tends to infinity finally we extend our results to the case where demand is compound poisson only a finite number of prices is allowed the demand rate is time varying holding costs are incurred and cash flows are discounted the initial stock is a decision variable and reordering overbooking and random cancellations are allowed

name your own price at priceline com strategic bidding and lockout periods a buyer suggests prices to n sellers in a time period and buys from the seller who accepts the bid first the number of bidding rounds is determined by how frequently the buyer can make an offer we show that with no limit on the frequency and without discounting the price path is either kept flat initially with large jumps at the end or increasing steadily over time which class of path occurs in equilibrium depends on the buyer s trade off between committing to a price ceiling versus finely screening the sellers costs with discounting limiting the number of rounds mitigates the delay caused by the reluctance to raise bids in the first class of equilibrium and therefore can benefit the buyer this result suggests why in reality bargaining parties often take measures to make their offers rigid and consequently force themselves to make fewer offers copyright oxford university press

consumption effects of genetic modification what if consumers are right this paper develops a model of differentiated consumers to examine the consumption effects of genetic modification gm under alternative labelling regimes and segregation enforcement scenarios analytical results show that if consumers perceive gm products as being different than their traditional counterparts gm affects consumer welfare and thus consumption decisions when the existence of market imperfections in one or more stages of the supply chain prevents the transmission of cost savings associated with the new technology to consumers gm results in welfare losses for consumers the analysis shows that the relative welfare ranking of the no labelling and mandatory labelling regimes depends on i the level of consumer aversion to gm products ii the size of marketing and segregation costs under mandatory labelling iii the share of the gm product in total production and iv the extent to which gm products are incorrectly labelled as non gm products

revenue management with strategic customers last minute selling and opaque selling companies in a variety of industries e g airlines hotels theaters often use last minute sales to dispose of unsold capacity although this may generate incremental revenues in the short term

ironing out the kinks in executive compensation linking incentive pay to average stock prices abstract traditional stock option grant is the most common form of incentive pay in executive compensation applying a principal agent analysis we find this common practice suboptimal and firms are better off linking incentive pay to average stock prices among other benefits averaging reduces volatility by about 42 making the incentive pay more attractive to risk averse executives holding the cost of the option grant to the firm constant asian stock options are more cost effective than traditional stock options and provide stronger incentives to increase stock price more importantly the improvement is achieved with little impact on the option grant s risk incentives after adjusting for option cost finally averaging also improves the value and incentive effects of indexed stock options

retail pricing and clearance sales sellers of new products are faced with having to guess demand conditions to set price appropriately but sellers are able to adjustprice over time and to learn from past mistakes additionally it is not necessary that all goods be sold with certainty it is sometimes better to set a high price and to risk no sale this process is modeledto explain retail pricing behavior and the time distribution of transactions prices start high and fall as a function of time on theshelf the initial price and rate of decline can be predicted and depends on thinness of the market the proportion of customers who are window shoppers and other observable characteristics copyright 1986 by american economic association

consumer information labelling and international trade in agri food products abstract the focus of the world trade organization is establishing limits on governments ability to impose trade barriers in response to producers requests for protection in recent years however requests for protection from imports has increasingly come from consumers over issues ranging from animal welfare concerns employment of child labour the use of growth hormones differing environmental standards and gm foods the current international trade regime is ill suited to deal with consumer based protectionism this paper develops a model that explicitly incorporates consumer concerns into an international trade model and compares the result with the standard treatment further using the model incorporating consumer concerns a labelling policy for imports is compared to an import embargo the labelling policy is found to be superior to an embargo implications are drawn for future trade negotiations pertaining to sanitary and phytosanitary measures and technical barriers to trade

durable goods monopolists durable goods monopolists face special problems because the sale of their products creates a secondhand market not controlled by the monopolist to the extent the monopolist is able to rent his product rather than sell it or to make binding promises about his future production such problems are ameliorated given the inability to do the above the monopolist is led to producing goods less durable than those produced by either competitive firms or monopolist returns a reverse averch johnson result that monopolist sellers may invest less in fixed costs including plant modernization and research and development than would the renters is shown it is also shown that even though sellers have less monopoly power than renters and nondurable goods monopolists it is possible that the seller will cause a greater deadweight loss than the other types of monopolies

revenue management with forward looking buyers a seller wishes to sell multiple goods by a deadline for example the end of a season potential buyers enter over time and can strategically time their purchases each period the profit maximizing mechanism awards units to the buyers with the highest valuations exceeding a sequence of cutoffs we show that these cutoffs are deterministic depending only on the inventory and time remaining in the continuous time limit the optimal mechanism can be implemented by posting anonymous prices when incoming demand decreases over time the optimal cutoffs satisfy a one period look ahead property and prices are defined by an intuitive differential equation

capacity choice counters the coase conjecture the coase conjecture 1972 is the proposition that a durable goods monopolist who sells over time and can quickly reduce prices as sales are made will price at marginal cost subsequent work has shown that in some plausible cases that conjecture does not hold we show that the coase conjecture does not hold in any plausible case in particular we examine that conjecture in a model where there is a vanishingly small cost for production capacity and the seller may augment capacity in every period in the gap case any positive capacity cost ensures that in the limit as the size of the gap and the time between sales periods shrink the monopolist obtains profits identical to those that would prevail when she could commit ex ante to a fixed capacity given a standard condition on demand those profits are at least 29 8 of the full static monopoly optimum

genetically modified organisms and trade rules identifying important challenges for the wto controversial debates associated with the establishment of international market access rules for genetically modified organisms gmos illustrate a more general challenge facing the world trade organisation wto to acceptably accommodate growing consumer concerns regarding a product s production and processing methods ppm this paper aims to clarify the debates by examining the foundations of and the procedures for the wto s decision making on ppm based market access rules to illustrate this both an import embargo and a mandatory labelling regulation for gmos are examined the strengths and weaknesses of the current decision making procedure are discussed and options for future negotiations are proposed

legal but costly an analysis of the eu gm regulation in the light of the wto trade dispute between the eu and the usa in this study we investigate the new european union eu regulations in the light of the ruling by the world trade organization wto panel on the trade in genetically modified crops to this end we describe the basic differences in approaches between the eu and the complaining parties with regard to genetically modified crops what the main arguments were of the complaining parties as well as the defence of the eu what the final judgement of the panel was and finally we describe the current eu regulations we then analyse to what extent the arguments and conclusions of the panel still hold regarding the new eu legislation we find that parts of the current eu legislation that is the safety bans as they are currently in place are in breach of the wto commitments moreover the new approval procedures have the potential to also break these rules although whether or not they will depends on how the european commission acts whether or not the eu will be challenged at the wto remains an open question as the decision to fight before the wto may be more costly than working out new bilateral trade agreements

durable goods monopoly with varying demand this paper solves for the proflt maximising strategy of a durable goods monopolist when incoming demand varies over time each period additional consumers enter the market these consumers can then choose whether and when to purchase we flrst characterise the consumer s utility maximisation problem and under a monotonicity condition show the proflt maximising allocation can be solved through a myopic algorithm which has an intuitive marginal revenue interpretation consumers ability to delay creates an asymmetry in the optimal price path which exhibits fast increases and slow declines this asymmetry pushes the price level above that charged by a flrm facing the average level of demand applications of this framework include deterministic demand cycles one ofi shocks and iid demand draws the optimal policy outperforms renting and can be implemented by a time consistent best price provision

continuous time repeated games in this paper the authors develop a model of strategic behavior in continuous time games of complete information which includes conventional repeated games in discrete time as a special case the model developed here admits a very large class of strategies that allows one to extend the repeated game model to continuous time the set of equilibria in this game may be large in many cases equal to the feasible individually rational set of payoff s the authors also study the restriction of renegotiation proofness in this framework and apply these results to a cournot duopoly example copyright 1993 by economics department of the university of pennsylvania and the osaka university institute of social and economic research association

foundations of dynamic monopoly and the coase conjecture subgame perfect equilibria are characterized for a market in which the seller quotes a price each period assume zero costs positive interest rate continuum of buyers and some technical conditions if buyers valuations are positive then equilibrium is unique buyers strategies are stationary and the price sequence is determinant along the equilibrium path but possibly randomized elsewhere otherwise a continuum of stationary equilibria can exist but at most one with analytic strategies coase s conjecture is verified for stationary strategies reducing the period length drives all prices to zero or the least valuation connections to bargaining models are described journal qf economic literature classification

the north american european union dispute over beef produced using growth hormones a major test for the new international trade regime at the time the negotiation of the sps agreement was seen as a major accomplishment of the uruguay round one of the first major tests of both the sps and the wto s new dispute settlement system was the long standing and acrimonious dispute between the eu and the us and canada over trade in beef produced using hormones both the sps and the disputes system performed as expected but the eu the loser in the case has chosen to ignore the wto panel s ruling and accept retaliation as a result the credibility of the wto is threatened and the outcome suggests that new negotiations may be required the issues in the case are outlined and implications for trade in biological products drawn

sequentially optimal auctions abstract in auctions where a seller can post a reserve price but if the object fails to sell cannot commit never to attempt to resell it revenue equivalence between repeated first price and second price auctions without commitment results when the time between auctions goes to zero seller expected revenues converge to those of a static auction with no reserve price with many bidders the seller equilibrium reserve price approaches the reserve price in an optimal static auction an auction in which the simple equilibrium reserve price policy of the seller mirrors a policy commonly used by many auctioneers is computed journal of economic literature classification numbers c78 d44 d82

cyclic pricing by a durable goods monopolist in the model of this paper a monopoly seller of a durable good holds periodic sales as a means of price discrimination a new cohort of consumers enters the market in each period interested in purchasing the good either immediately or after a delay within each cohort consumers vary in their tastes for the good under broad conditions the seller will vary the price over time in most periods he will charge a price just low enough to sell immediately to consumers with a high willingness to pay periodically however he will drop the price far enough to sell to an accumulated group of consumers with a low willingness to pay

when does extra risk strictly increase an option s value it is well known that risk increases the value of options this article makes that precise in a new way the conventional theorem says that the value of an option does not fall if the underlying asset becomes riskier in the conventional sense of the mean preserving spread this article uses two new definitions of riskier to show that the value of an option strictly increases i if the underlying asset becomes pointwise riskier and ii only if the underlying asset becomes extremum riskier

intertemporal price discrimination dynamic arrivals and changing values we study the profit maximizing price path of a monopolist selling a durable good to buyers who arrive over time and whose values for the good evolve stochastically the setting is completely stationary with an infinite horizon contrary to the case with constant values optimal prices fluctuate with time we argue that consumers randomly changing values offer an explanation for temporary price reductions that are often observed in practice

call options and the risk of underlying securities abstract merton 1973 in his seminal article theory of rational option pricing showed that the rationally determined price of a call option is a non decreasing function of the riskness of its associated common stock in deriving his results merton made restrictive assumptions about the way the market prices payoff distributions and used the rothschild stiglitz 1970 measure to compare the riskiness of securities i show by means of an example that the merton result will not in general be true i then derive a sufficient condition for the option on one stock to have higher market value than the option on another stock when both the stocks have the same price and explain why the merton result is valid in the black scholes environment

disguised protectionism and linkages to the gatt wto member states of the gatt wto have linked some issue areas outside trade to the institution and did so with varying depths at the same time they have chosen not to link other issue areas what accounts for this variation the author argues that states establish a legalized linkage between the gatt wto and an issue area outside it when they are uncertain about the possibilities of disguised protectionism such uncertainty exists under two conditions when diversity in regulations in an issue area across states generates a large adverse impact on trade negative externalities but that diversity can be justified at the international level for 1 having an independent objective apart from hampering trade and 2 when there are few alternative policies to achieve that objective legitimacy states establish a highly legalized linkage in these situations to reduce the uncertainty and minimize disguised protectionism by contrast when regulatory diversity exhibits low legitimacy states establish only a weakly legalized linkage in the absence of meaningful externalities they do not establish any linkages the author evaluates this argument in two ways he provides an overview of eleven issue areas about which there have been some debates or conflicts about linkages to the gatt wto in addition he carries out in depth case studies of three issue areas labor standards environmental standards and health safety standards the findings of this article contribute to a better understanding of international institutions and cooperation as well as of the evolution of the multilateral trade institution

dynamic competition with random demand and costless search a theory of price posting this paper studies a dynamic model of perfectly competitive price posting under demand uncertainty firms must produce output in advance after observing aggregate sales in prior periods firms post prices for their unsold output in each period the demand of a new batch of consumers is randomly activated existing customers who have not yet bought and then new customers arrive at the market in random order observe the posted prices and either purchase at the lowest available price or delay their purchase decision we construct a sequential equilibrium in which the output produced and its allocation across consumers is efficient thus consumers endogenously sort themselves efficiently with the highest valuations purchasing first transaction prices in each period rise continuously as firms become more optimistic about demand followed by a market correction by the last period prices are market clearing

auctions versus posted price selling two popular selling methods posted price selling and auctions are compared here in an independent private values model without auctioning costs auctioning is always optimal when auctioning is costly auctions are still preferable if the marginal revenue curve is sufficiently steep the global steepness of the marginal revenue curve is found to coincide with the dispersion around the mean for a number of standard distributions finally the prices of the monopoly seller and of the social optimum are compared copyright 1993 by american economic association

agricultural export dumping the case of mexican winter vegetables in the u s market this paper examines the 1978 agricultural dumping charge brought by florida winter vegetable producers against mexican growers it discusses fair value in the context of three antidumping criteria prices at home and abroad selling below cost of production and third market test the u s department of commerce found in favor of the mexican producers by using the third market test a test which leads to ambiguous results it is the authors contention that the law should be changed so that future cases can be decided on a normal business practice concept accounting for production and costing decisions unique to highly perishable products

a theory of clearance sales clearance sales are widely used by firms as an intertemporal selling policy in particular in markets where firms face demand uncertainty and need to choose capacity in advance clearance sales consist in charging a high price initially but then lowering the price in the sales period high valuation consumers purchase the good at the high initial price so as to avoid rationing at the low price while low valuation consumers wait for the price to drop we develop a simple model of intertemporal monopoly pricing under demand uncertainty and show that clearance sales may be the optimal intertemporal selling policy

reputation in bargaining and durable goods monopoly this paper analyzes durable goods monopoly in an infinite horizon discrete time game we prove that as the time interval between successive offers approaches zero all seller payoffs between zero and static monopoly profits are supported by subgame perfect equilibria this reverses a well known conjecture of coase alternatively one can interpret the model as a sequential bargaining game with one sided incomplete information in which an uninformed seller makes all the offers our folk theorem for seller payoffs equally applies to the set of sequential equilibria of this bargaining game

dynamic pricing advance sales and aggregate demand learning in airlines this paper uses a unique u s airlines panel data set to empirically study the dynamic pricing of inventories with uncertain demand over a finite horizon i estimate a dynamic pricing equation and a dynamic demand equation that jointly characterize the adjustment process between prices and sales as the flight date nears i find that the price increases as the inventory decreases and decreases as there is less time to sell consistent with aggregate demand learning and price adjustment demand shocks have a positive and much larger effect on prices than the positive effect of anticipated sales

consumer perceived risk model for the introduction of genetically modified food in spain abstract since the last part of the 20th century the search for new forms of cultivation and food has basically centred on the application of biotechnology giving rise to gm foods consumer acceptance is conditioned by the risk that they perceive from introducing food into their consumption habits processed through technology that they hardly understand besides information is insufficient in the consumer ambit and moreover it is influenced by ideological and ethical determining factors the factors were analysed that influence this consumer perceived risk through a structural equation model this study was conducted in spain concretely in the province of alicante located in the southeast of this country the main conclusion from this research is that the introduction of gm food into agro food markets should be accompanied by adequate policies to guarantee consumer safety these actions would allow a decrease in consumer perceived risk by taking special care of the information provided concretely relating to health for the most influential factor in consumer perceived risk from these foods is concern about health

selling a lemon under demand uncertainty we consider a seller who has private information about the quality of her good but is uncertain about buyer arrivals assuming that the high quality seller insists on a price we show that the low quality seller s surplus and pricing strategy crucially depend on buyers knowledge about the demand state if they are also uncertain about demand then demand uncertainty increases the low quality seller s expected payoff and her optimal strategy is to lower the price after some time if buyers know the demand state then demand uncertainty does not affect the low quality seller s payoff but she must employ a sophisticated pricing strategy

bilateral monopolies and incentives for merger the paper presents a model of duopoly in which firms acquire inputs through bilateral monopoly relations with suppliers it combines a bargaining model with a duopoly model to examine how input pri

a non cooperative bargaining model with strategically timed offers abstract rubinstein s alternating offers bargaining model is enriched by allowing players to choose when and whether or not to make an offer time is continuous and players make offers whenever they wish it is assumed that upon making an offer players must wait a fixed amount of time before making another it is shown that if players can react arbitrarily quickly to their opponent s offers then all subgame perfect equilibrium outcomes are rubinstein like in particular efficient however if it takes time to react then some delay can be supported this potential delay becomes arbitrarily large as reaction times increase journal of economic literature classification numbers c78 c72

auctions with limited commitment we study the role of limited commitment in a standard auction environment in each period the seller can commit to an auction with a reserve price but not to future reserve prices we characterize the set of equilibrium profits attainable for the seller as the period length vanishes an immediate sale by efficient auction is optimal when there are at least three buyers for many natural distributions two buyers is enough otherwise we give conditions under which the maximal profit is attained through continuously declining reserve prices

dynamic price competition with capacity constraints and a strategic buyer we analyze a simple dynamic durable good model two incumbent sellers and potential entrants choose their capacities at the start of the game we solve for equilibrium capacity choices and the necessarily mixed pricing strategies in equilibrium the buyer splits the order with positive probability to preserve competition making it possible that a high and low price seller both have sales sellers command a rent above the value of unmet demand by the other seller a buyer benefits from either a commitment not to make future purchases or by hiring an agent to always buy from the lowest priced seller

ethics domestic food policy and trade law assessing the eu animal welfare proposal to the wto abstract in response to rising consumer interest in the well being of animals used in commercial food production the european union eu has been increasing its animal welfare standards this does nothing however to inform consumers of the welfare standards that have been applied to food that is imported satisfying consumers desire to know about foreign animal welfare standards however will require the labelling of imports labelling of imports for animal welfare purposes is not consistent with world trade organisation wto obligations further raising animal welfare standards increases costs for eu livestock producers reducing their international competitiveness the eu has made a formal proposal to the wto members to negotiate an agreement on international trade rules pertaining to animal welfare this paper assesses the eu proposal in the context of both domestic food policy making and international trade law it concludes that as currently constituted the wto is unable to adequately address the issue but that re negotiation is likely to be both difficult and acrimonious suggestions for wto reform are presented

opportunism in multilateral vertical contracting nondiscrimination exclusivity and uniformity comment an input supplier selling to competing downstream firms would benefit from publicly committing at the outset to all contracts efficient commitment however would require complete contracts the authors study instead bilateral contracting without commitment regarding others terms each firm then fears that the supplier might opportunistically renegotiate another s contract to increase bilateral profit at the firm s expense the authors show that nondiscrimination clauses generally cannot curb such third party opportunism even with symmetric firms to reassure firms crude forms of commitment may be adopted this could explain the pervasiveness of exclusivity arrangements and the striking uniformity and intertemporal rigidity of franchise contracts copyright 1994 by american economic association

the timing of sales this paper presents a model of intertemporal price discrimination a fixed number of sellers produce a homogeneous good consumers with different preferences enter the market in each period and leave when they make a purchase the sellers typically vary their prices over time charging a high price in most periods but occasionally cutting the price to sell to a large group of customers with a low reservation price in some equilibria all stores lower their price at the same time and to the same level

advance purchase discounts and monopoly allocation of capacity optimal pricing by a monopoly airline that faces capacity constraints during the peak demand period is studied the existence of capacity constraints means that in order to expand output the airline must divert demand from the peak period to the off peak period a particular advance purchase discount policy is shown to be the profit maximizing method of selling tickets if the advance purchase requirement were infeasible output and total surplus would both be lower jel l12 substantial discounts for air travel are generally available to travelers who are willing to purchase tickets a week or more in advance of the departure date this paper demonstrates why the imposition of an advance purchase requirement may be a profit maximizing strategy for a monopoly airline facing capacity constraints during times of peak demand 1 the practice of imposing an advance purchase requirement on discount tickets is also placed in a favorable light in terms of its impact on social

marginal cost pricing when spot markets are complete the standard formulation of a spot market subject to uncertain excess demand uses a tatonnement process that restricts trade until the market clearing price is found here i present a model in which there is no restriction on trade during the process of the resolution of uncertainty about aggregate excess demand the idea is to enlarge the commodity space and define goods by the probability that they will sell in addition to other characteristics the probability of sale characteristic is the spot market analogue of the contingencies under which delivery will take place in the arrow debreu model a failure to distinguish goods by the probability of sale characteristic can lead to the rejection of the competitive paradigm even when everyone is a price taker and the allocation is efficient

equilibrium price dispersion under demand uncertainty the roles of costly capacity and market structure when capacity is costly and prices are set in advance firms facing uncertain demand will sell output at multiple prices and limit the quantity available at each price i show that the optimal price strategy of a monopolist and the unique pure strategy nash equilibria of oligopolists both exhibit intrafirm price dispersion moreover as the market becomes more competitive prices become more dispersed a pattern documented in the airline industry while generating similar predictions the model differs from the revenue management literature because it disregards market segmentation and fare restrictions that screen customers

the comparative statics of changes in risk revisited abstract in this paper we consider the problem of determining the conditions under which a change in risk increases the optimal value of a decision variable for all risk averse agents for a large class of payoff functions we obtain the least constraining necessary and sufficient condition on the change in risk for signing its effect without any additional restriction on the utility function than risk aversion it entails all existing sufficient conditions as particular cases our results are applied to the linear model which describes the standard portfolio problem the necessary and sufficient condition for unambiguous comparative statics in this class of problems is termed greater central riskiness cr it is shown that cr dominance is neither stronger nor weaker than second degree stochastic dominance journal of economic literature classification number d81

optimal price skimming by a monopolist facing rational consumers this paper considers the intertemporal pricing problem for a monopolist marketing a new product the key feature differentiating this paper from the extant management science literature on intertemporal pricing is the assumption that consumers are intertemporal utility maximizers a subgame perfect nash equilibrium pricing policy is characterized and shown to involve intertemporal price discrimination we compare this policy to the optimal policy for a monopolist facing myopic consumers and find that for any given state prices are always lower with rational consumers than with myopic consumers for plausible parameter values the assumption of consumer rationality can be shown to lead to large differences in optimal prices moreover if a monopolist facing rational consumers implements the optimal myopic consumer pricing policy profits can be significantly less than if the monopolist follows the equilibrium pricing policy for rational consumers

durable goods monopoly with entry of new consumers this paper analyzes a model of a dynamic monopolist who produces at constant unit cost each period a new cohort of consumers enters the market each entering cohort is identical consumers within a cohort have different tastes for the good my main results are if players are sufficiently patient any positive average profit less than the maximum feasible level can be attained in a subgame perfect equilibrium in the subset of subgame perfect equilibria in which players use stationary strategies the seller cannot make sales at prices significantly greater than the lowest willingness to pay when period length goes to zero and the seller attains the maximum profit when commitment is feasible by charging the same static monopoly price in every period this paper analyzes a model of a dynamic monopolist who operates in a market in which there is a regular flow of new consumers the seller produces a durable good at constant unit cost each period a new cohort of consumers enters the market consumers wish to buy exactly one unit of the item but are willing to wait resales are not allowed each entering cohort is identical

process attributes of goods ethical considerations and implications for animal products abstract conventional wisdom holds that process is irrelevant to the demand function for a good if it cannot be observed in the final good s characteristics organizations promoting trade even promulgate regulations requiring that process information be thrown out as tariffs or barriers to trade it is argued here that even if end products are physically identical process is a relevant dimension of goods that can have a major impact on the demand function particularly process elements related to the ethical dimensions of production implications of process attributes of goods and their information implications are explored particularly regarding animal products and the environment it is concluded that institutional barriers currently provide consumers with insufficient process information for markets to function optimally additional information should be provided to consumers

reforming the wto to defuse potential trade conflicts in genetically modified goods perdikis nicholas kerr w a hobbs j e reforming the wto to defuse potential trade disputes in genetically modified goods world economy 2002 24 3 pp 379 398

durable goods monopoly with stochastic values i analyze a durable goods model that allows consumers values to vary over time the optimal mechanism for a monopolist is computed and compared to both the sales and leasing equilibria i show that sales may implement the optimal strategy and that the dominance of leasing over sales is not necessarily true this implication is consistent with the prevalence of simple sales contracts in many markets copyright 2001 by the rand corporation

revenue management without commitment dynamic pricing and periodic flash sales a seller has a fixed number of goods to sell by a deadline at each time he posts a regular price and decides whether to hold a flash sale over time buyers privately enter the market and strategically time their purchases if a buyer does not purchase when she arrives she can pay an attention cost to recheck the regular price afterwards or she can wait for future flash sales where she may obtain a good at a discounted price in the unique markov perfect equilibrium the seller sporadically holds flash sales to lower the stock of goods a flash sale increases the willingness to pay of future buyers but decreases the willingness to pay of buyers who arrive early in the game when it is very likely that a buyer will obtain a good in a flash sale the seller holds a big initial flash sale for all but one unit of the good

general properties of option prices when the underlying price process is a one dimensional diffusion as well as in certain restricted stochastic volatility settings a contingent claim s delta is bounded by the infimum and supremum of its delta at maturity further if the claim s payoff is convex concave the claim s price is a convex concave function of the underlying asset s value however when volatility is less specialized or when the underlying process is discontinuous or non markovian a call s price can be a decreasing concave function of the underlying price over some range increasing with the passage of time and decreasing in the level of interest rates much of the financial options literature derives precise option prices when the underlying asset price process is completely specified since it is empirically difficult to ascertain what the true underlying process is another part of that literature is concerned with deriving general properties of option prices when the underlying price process is not fully specified but instead is assumed to belong to some general class of stochastic processes merton 1973 cox and ross 1976 jagannathan 1984 in particular in the absence of arbitrage opportunities and assuming that the risk neutralized stock price follows a proportional stochastic process a risk neutral return distribution independent of price merton 1973 and jagannathan 1984 show that a call option s price is an increasing convex function of the stock price cox and ross 1976

sequential bargaining with incomplete information this paper describes a simple two person two period bargaining game and solves it using the concept of perfect bayesian equilibrium in which the actions of each player convey information which is used by his opponent the paper examines the effects of changes in bargaining costs the size of the contract zone and the length of the bargaining process on such aspects of the solution as the probability of impasse and the likelihood of concessions the combination of information transfer and the lack of pre commitment embodied in perfectness yields many surprising results common perceptions about the effects of parameter changes on bargaining processes are suspect and should be checked in the particular game being discussed

optimal dynamic mechanism design with deadlines a seller maximizes revenue from selling an object in a dynamic environment with buyers that differ in their patience each buyer has a privately known deadline for buying and a privately known valuation first we derive the optimal mechanism neglecting the incentive constraint for the deadline the deadline of the winner determines the time of the allocation and therefore also the amount of information available to the seller when he decides whether to allocate to a buyer depending on the shape of the markup that the seller uses this can lead to a violation of the neglected incentive constraint we give sufficient conditions on the type distribution under which the neglected constraint is fulfilled or violated second for the case that the constraint cannot be neglected we consider a model with two periods and two buyers here the optimal mechanism is implemented by a fixed price in period one and an asymmetric auction in period two the asymmetry which is introduced to prevent the patient type of the first buyer from buying in period one leads to pooling of deadlines at the top of the type space

what labelling policy for consumer choice the case of genetically modified food in canada and europe faced with divergent opinions among consumers on the use of genetically modified gm foods canada has adopted a voluntary labelling approach for non gm foods whereas the european union has a mandatory labelling policy for gm foods interestingly both labelling systems have resulted in very little if any additional consumer choice using an analytical model we show that the coexistence of gm and non gm products at the retail level depends on the labelling policy consumer perceptions and the type of product although voluntary labelling tends to favour the use of gm products it is more likely to provide consumer choice confrontes a des opinions publiques divergentes sur l usage des aliments genetiquement modifies gm le canada a adopte une politique d etiquetage volontaire pour les aliments non gm alors que l union europeenne a mis en place une politique d etiquetage obligatoire des aliments gm curieusement ces deux systemes d etiquetage n ont pas reellement permis de faciliter le choix des consommateurs a l aide d un modele analytique nous demontrons que la coexistence des produits gm et non gm au niveau du commerce de detail depend de la politique d etiquetage de la perception des consommateurs et du type de produit bien que l etiquetage volontaire ait tendance a favoriser l usage des produits gm cette approche est plus a meme de faciliter le choix du consommateur que l etiquetage obligatoire

delay and information aggregation in stopping games with private information abstract we consider equilibrium timing decisions in a model with a large number of players and informational externalities the players have private information about a common payoff parameter that determines the optimal time to invest they learn from each other in real time by observing past investment decisions we develop new methods of analysis for such large games and we give a full characterization of symmetric equilibria we show that the equilibrium statistical inferences are based on an exponential learning model although the beliefs converge to truth learning takes place too late ex ante welfare is strictly between that without observational learning and that with full information

storable good monopoly the role of commitment we study dynamic monopoly pricing of storable goods in an environment where demand changes over time the literature on durables has focused on incentives to delay purchases our analysis focuses on a different intertemporal demand incentive for consumers the key force on the consumer side is advance purchases or stockpiling this stockpiling motive can be present in the case of standard durables as well in environments unmodeled in the prior literature we show that if the monopolist cannot commit then prices are higher in all periods and social welfare is lower than in the case in which the monopolist can commit this is in contrast with the durable goods analysis in the literature on the coase conjecture