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

the probability of sale and price premiums in withdrawn auctioned properties this paper examines the impact of the auction process of residential properties that whilst unsuccessful at auction sold subsequently the empirical analysis considers both the probability of sale and the premium of the subsequent sale price over the guide price reserve and opening bid the findings highlight that the final achieved sale price is influenced by key price variables revealed both prior to and during the auction itself factors such as auction participation the number of individual bidders and the number of bids are significant in a number of the alternative specifications

equilibrium properties of auctions and alternative procedures for allocating transferable permits abstract this paper examines the equilibrium properties of a range of auctions and related procedures placing emphasis on the types of procedures that are likely to be of special interest in environmental management applications nash equilibrium properties are first derived for a very general class of auctions for multiple homogeneous or heterogeneous objects or permits next it is shown that given appropriate assumptions three broad classes of public allocation procedures that do not generate revenues for the government would yield participants equal expected profits these classes are 1 incentive compatible auctions where bidders receive equal lump sum refunds 2 non incentive compatible procedures where refunds are a function of participants bids and 3 free initial distribution of permits on a lump sum basis followed by trading via a competitive market the applicability of the general results is then demonstrated by examining the particular non incentive compatible fair division procedure originally suggested by knaster finally implications of the theoretical results for applications including the allocation of transferable discharge permits and water rights are discussed

money back guarantees and market experimentation abstract we study the use of money back guarantees as a form of market experimentation in a market for experience goods with repeat purchases we show that extending the customer base in the second period by using a money back guarantee can be optimal only if a monopolist faces an uncertain distribution of buyers within the second period a money back guarantee allows the monopolist to discriminate between new and repeat purchasers while a pure price reduction does not thus whenever money back guarantees are feasible an optimal experimentation strategy includes a money back guarantee in the second period but not necessarily a price reduction

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

endogenous quality differentiation in congested markets firms selling a product with congestion externalities to a heterogeneous population of customers have an incentive to offer differentiated levels of quality in a price competitive market differentiation arises endogenously through the prices chosen by firms in equilibrium firms offer a range of prices which induce an efficiency improving range of quality levels and allow customers to self select their preferred price quality combinations additional results suggest that with many firms in the market the choice of prices dominates the choice of service capacities in determining congestion levels copyright 1991 by blackwell publishing ltd

managing online auctions current business and research issues the internet s computational power and flexibility have made auctions a widespread and integral part of both consumer and business markets though online auctions are a multi billion dollar annual activity with a growing variety of sophisticated trading mechanisms scientific research on them is at an early stage this paper analyzes the current state of management science research on online auctions it develops a broad research agenda for issues such as the behavior of online auction participants the optimal design of online auctions the integration of auctions into the ongoing operation of firms and the use of the data generated by online auctions to inform future trading mechanisms these research areas will draw from applied and theoretical work spanning management science economics and information systems

imperfect price discrimination and welfare we develop a model in which a monopolist uses differences across consumers in their valuation of time to imperfectly price discriminate though it is customary to analyse price discrimination problems by the calculus of variations after postulating a continuum of types we assume a finite number of types and exploit the geometry and duality of the contract set and the structure of the programming specification we analyse in detail the qualitative properties of the model s solution and show by construction that our results exhaust the implications of the model for equilibrium contract pairs we show that imperfect discrimination is not bounded in welfare terms between perfect discrimination and single price monopoly and that the deadweight loss consumer surplus and output comparisons between single price monopoly and imperfect discrimination are ambiguous

the efficiency of competitive equilibria in insurance markets with asymmetric information abstract this paper addresses the relationship between competitive equilibria and efficient allocations in an insurance market with asymmetric information using the definition of second best efficiency proposed by harris and townsend 1981 for environments characterized by informational assmmetry the efficiency properties of several proposed market equilibria are examined we find an analogue to the first optimality theorem a miyazaki wilson equilibrium always results in a second best allocation

the uk association conference attendance decision making process this paper reports on research carried out into the consumer behaviour displayed by uk association conference delegates when deciding to attend a conference examination of the available literature suggested that there has been little investigation of the delegate s perspective on attending a conference as most research into business events has traditionally been centred on the supply side particularly convention destination image and association site selection the paper found six underlying dimensions of the uk association conference delegate decision making process personal professional development networking opportunities cost location time and convenience and health and wellbeing additionally regression analysis showed that two of the dimensions networking opportunities and cost were significant predictors of intention to attend the conference again in the future

using yield management to shift demand when the peak time is unknown traditional peak load and stochastic peak load models assume firms have prior information about when peak demand occurs however price dispersion such as is typically used by firms practicing yield management can achieve some of the same efficient demand shifting even when the peak time is unknown equilibrium price dispersion arises because of stochastic demand and price rigidities but a previously unexplored benefit of price dispersion is its ability to reduce equilibrium capacity costs through demand shifting the model also suggests how yield management now more commonly called revenue management might actually benefit business travellers contrary to the popular prejudice

auctions an introduction abstract this is a detailed introduction to auction theory it begins with a simple analysis of standard auctions and then uses a strikingly simple general solution of symmetric private values auctions to prove the payoff equivalence of many auction rules the basic framework is then modified to admit risk aversion multi unit and repeated auctions as well as collusion then follows an introduction to optimal auctions with and without stochastic entry and to common value auctions and the winner s curse problem the survey closes with a sample of applications from the regulation of natural monopolies to price competition in oligopoly and the government securities market

aggregate spending and the terms of trade is there a laursen metzler effect this paper investigates the spending and current account effects of terms of trade shifts in a model where households maximize utility over an infinite planning period in the framework developed here an economy specialized in production must experience a fall in aggregate spending and a current surplus as a result of an unanticipated permanent worsening in its terms of trade the paper s model thus provides a setting in which the current account deficit predicted by laursen and metzier harberger and others fails to materialize

extracting rents with forward contracts abstract we consider a risk neutral final goods producer operating with a concave production function we show that when faced with the possibility of quantity rationing in the spot market for an input the producer will always pay a premium to purchase some units of that input in a forward market a monopolistic supplier of the input can therefore earn additional rents by offering to sell units in both a forward market and a spot market effectively price discriminating along a producer s demand curve for the input we thus provide a model of forward contracting in which prices are set sequentially there is no risk aversion and customers purchase positive quantities in both the forward and the spot market

a structural model of competing sellers auctions and posted prices in an original data set of goods listed for sale online i observe that both auctions and posted prices are popular with buyers and sellers in the compact disc market to explain why these two mechanisms coexist i estimate a structural model of competing sellers who differ in the value of their outside options buyers are allowed to value auctioned and posted price goods differently but the estimated value distributions suggest that differences across buyers do not explain the mechanism coexistence that i observe in contrast differences across sellers outside options are important the value of the outside option segments the market with high outside option sellers choosing to post a fixed price there are two key forces at work that drive this empirical result first competition between sellers favors coexistence over an auction only or a posted price only marketplace because sellers prefer to be in a market with fewer rivals second sellers with more valuable outside options prefer the posted price mechanism because posted price goods sell less often than auctioned goods but at a higher price as a result a larger outside option reduces the loss from not selling and favors the posted price mechanism

the terms of trade and the current account the harberger laursen metzler effect the paper examines the effect of terms of trade changes on a small country s spending and current account assuming optimizing behavior in an intertemporal framework with perfect international capital mobility a temporary future terms of trade deterioration implies a deterioration improvement of the trade balance whereas a permanent terms of trade deterioration has an ambiguous effect depending on the rate of time preference nominal and real variables are considered via exact price indexes two periods and an infinite horizon are examined

is there a j curve abstract if the response of the value of the trade balance to movements in the real exchange rate is described by a j curve then a real depreciation initially worsens a balance of trade deficit only improving it over time this paper investigates whether a j curve can be detected in the last twenty five years of american data no statistically reliable evidence of a stable j curve is detected the model is checked extensively to support this finding

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

dynamic pricing when consumers are strategic analysis of posted and contingent pricing schemes abstract we study dynamic pricing policies for a monopolist selling perishable products over a finite time horizon to strategic buyers buyers are strategic in the sense that they anticipate the firm s price policies it is expensive and administratively difficult for most brick and mortar retailers to change prices placing limits on the number of price changes and the types of pricing policies they can adopt the simplest policy is to commit to a set of price changes a more complex alternative is to let the price depend on sales history we investigate two pricing schemes that we call posted and contingent pricing using the posted pricing scheme the firm announces a set of prices at the beginning of the horizon in the contingent pricing scheme price evolution depends upon demand realization our focus is on the posted pricing scheme because of its ease of implementation counter to intuition we find that neither a posted pricing scheme nor a contingent pricing scheme is dominant and the difference in expected revenues of these two schemes is small limiting the number of price changes will result in a decrease in expected revenues we show that a multi unit auction with a reservation price provides an upper bound for expected revenues for both pricing schemes numerical examples suggest that a posted pricing scheme with two or three price changes is enough to achieve revenues that are close to the upper bound dynamic pricing is only useful when strategic buyers perceive scarcity we study the impact of scarcity and derive the optimal stocking levels for large markets finally we investigate whether or not it is optimal for the seller to conceal inventory or sales information from buyers a firm benefits if it does not reveal the number of units it has available for sale at the beginning of the season or subsequently withholds information about the number of units sold

vertical and horizontal intra industry trade a cross industry analysis for the united kingdom a large theoretical literature has emerged directed at explaining the presence of intra industry trade iit one of the distinctions which comes out of these models is that between horizontal iit where goods are differentiated by attributes and vertical iit where goods are differentiated by quality in this paper horizontal and vertical iit in u k trade are disentangled using a unit value dispersion criterion and a range of industry characteristics the paper not only points up the relative importance of vertical and horizontal iit in the united kingdom it also demonstrates how a failure to separate them out can impact on the interpretation of empirical results copyright 1995 by royal economic society

personalized prices and uncertainty in monopsony abstract we analyze personalized pricing by a monopsonist facing a finite number of ex ante identical capacity constrained suppliers with privately known costs when the distribution of costs is sufficiently smooth and regular the buyer chooses to make the same offer to all suppliers leading to a posted price when demand is sufficiently concave convex this price is lower higher than the classical monopsony price in the limit as the seller capacities tend to zero we obtain the classical monopsony price therefore our model provides a decentralized micro foundation for monopsony

monopoly power and distribution in fragmented markets the case of groundwater using data from pakistan s punjab the authors examine monopoly power in the market for groundwater irrigation water extracted using private tubewells a market characterized by barriers to entry and spatial fragmentation simple theory predicts that tubewell owners should price discriminate in favor of their own share tenants and this analysis of individual groundwater transactions over an 18 month period confirms such price discrimination and among those studied tubewell owners and their tenants use considerably more groundwater on their plots than do other farmers the authors also provide evidence that monopoly pricing of groundwater leads to compensating albeit small reallocations of canal water which farmers exchange in a separate informal market despite the substantial misallocation of groundwater a welfare analysis show that monopoly pricing has limited effects on equity and efficiency in the long run a policy aimed at eliminating monopoly pricing would do little to help the poorest farmers

on strategic quantity bidding in multiple unit auctions standard studies of multiple unit auctions generally overlook the strategic role of bidders quantity decisions using a simple equilibrium model of bidding the author analyzes bidders incentives to choose quantities in discriminatory and competitive auctions the main result is that bidders have a stronger strategic incentive to bid for fewer units in competitive auctions since under competition a bidder pays the lowest accepted price for each unit she gets she may benefit from dropping her quantity to let lower valuing bidders enter the set of winners this prediction is consistent with empirical observations from foreign currency and spectrum auctions copyright 1997 by blackwell publishing ltd

commercial policy and intra industry trade abstract this paper constructs a model of intra industry trade within a multi product industry whose output range is limited to that obtainable from a particular type of capital intra industry trade is a natural outcome in this structure without requiring increasing returns to scale or imperfectly competitive markets and with its pattern determined along traditional relative factor abundance lines the volume of this trade will vary inversely with the level of trade restrictions as observed empirically other policies are then considered for their influence on the range rather than the level of domestic production since the former is the more likely policy objective under these circumstances

allocating uncertain and unresponsive resources an experimental approach we identify an important class of economic problems that arise naturally in several applications the allocation of multiple resources when there are uncertainties in demand or supply unresponsive supplies no inventories and fixed capacities and significant demand indivisibilities rigidities examples of such problems include scheduling job shops airports or supercomputers zero inventory planning and the allocation and pricing of nasa s planned space station using experimental methods we show that the two most common organizations used to deal with this problem markets and administrative procedures can perform at very low efficiencies 60 65 efficiency in a seemingly robust example thus there is a need to design new mechanisms that more efficiently allocate resources in these environments we develop and analyze two mechanisms that arise naturally from auctions used to allocate single dimensional goods these new mechanisms involve computer assisted coordination made possible by the existence of networked computers both mechanisms significantly improve on the performance of administrative and market procedures

does responsive pricing smooth demand shocks using data from a unique pricing experiment we investigate vickrey s conjecture that responsive pricing can be used to smooth both predictable and unpredictable demand shocks our evidence shows that increasing the responsiveness of price to demand conditions reduces the magnitude of deviations in capacity utilization rates from a pre determined target level a 10 increase in price variability leads to a decrease in the variability of capacity utilization rates between 2 and 6 we discuss implications for the use of demand side incentives to deal with congestible resources

efficient and competitive rationing abstract the contracts that interest us here are called priority service contracts the salient feature of such contracts is that they specify each customer s priority in obtaining service that is they specify the tank order in which a customer is served out of the available supply until all customers are served or supply is exhausted such contracts essentially establish queues for customers in section 1 the author provides some background about priority service section 2 formulates a basic model and offer several illustrations also describes two main examples that motivate the theoretical development section 3 derives some key results that show how the prices of priority service contracts are designed to induce customers to self select efficient service orders in section 4 the author discusses various ways that state enterprises can organize markets that implement priority service efficiently in section 5 we study the operation of competitive markets for priority service section 6 concludes with some summary remarks two themes are emphasized one is that a state enterprise can promote substantial efficiency gains by substituting priority service for absent spot markets the other is that oligopolistic firms may have insufficient incentives to offer efficient product diversity consequently allocative efficiency depends on entry of numerous firms even so dispersal of supplies among many firms can prevent productive efficiency when there are advantages from pooling supplies

optimal pricing with speculators and strategic consumers this paper studies a monopolist firm selling a fixed capacity the firm sets a price before demand uncertainty is resolved speculators may enter the market purely with the intention of resale which can be profitable if demand turns out to be high consumers may strategically choose when to purchase and they may also choose to purchase from the firm or from the speculators we characterize equilibrium prices and profits and analyze the long run capacity decisions of the firm there are three major findings first the presence of speculators increases the firm s expected profits even though the resale market competes with the firm second by facilitating resale the firm can mimic dynamic pricing outcomes and enjoy the associated benefits while charging a fixed price third speculative behavior may generate incentives for the seller to artificially restrict supply and thus may lead to lower capacity investments we also explore several model extensions that highlight the robustness of our results

capacity allocation using past sales when to turn and earn consider a supplier selling to multiple retailers demand varies across periods but the supplier s capacity and wholesale price are fixed if demand is high the retailers needs exceed capacity and the supplier must implement an allocation mechanism to dole out production we examine how the choice of mechanism impacts retailer actions and supply chain performance in particular we analyze turn and earn allocation a method commonly used in the automobile industry this scheme bases current allocations on past sales and thus enables retailers to influence their future allocations they compete for scarce capacity even if they do not compete for customers we show that turn and earn induces the retailers to increase their sales when demand is low and the supplier s capacity is otherwise underutilized supplier profits thus increase the impact on the supply chain depends on how restrictive capacity is with mildly tight capacity the retailers higher sales rate does not significantly lower their profits but does reduce the cost of idle capacity supply chain performance improves with extremely tight capacity the retailers intense competition dissipates more profits than the supplier gains and supply chain performance suffers consequently turn and earn does not generally coordinate the system it is best characterized as a means for the supplier to increase her profits at the expense of the retailers and potentially even the supply chain furthermore these results hold even if the retailers can hold inventory in anticipation of scarce capacity

involuntary unemployment and worker self selection abstract consider a firm that lacks information about the reservation wage or ability of any specific worker but is aware that workers with higher reservation wages tend to be more able on average we show that under a simple condition that the efficiency wage exceeds the lowest reservation wage the optimal hiring policy for the firm involves 1 no wage discrimination and 2 rationing of jobs when demand for its product is low the result also extends to the case where hours of work are variable provided each worker is most productive when working a strictly positive number of hours per week

convention tourism modelling abstract this paper introduces an approach for identifying the determinants of convention attendance at alternative cities this approach permits planners to evaluate the relative importance of accessibility and attractiveness variables as determinants of convention attendance for each site four major convention sites in the usa are analysed to illustrate the procedure in this example accessibility was found to be far more important than attractiveness

vertical product differentiation and the import demand function theory and evidence in this paper we use a model of vertical product differentiation to cast doubt on the general validity of the import demand function as specified in macroeconomic models the empirical importance of our theoretical concerns is then established according to our first hypothesis the share of a good s imports in total imports is non increasing in domestic wages if the country has comparative advantage in high quality varieties of this good the second hypothesis states that the share of a good s imports is increasing in non wage domes tic income if the country has comparative advantage in high quality varieties of this good

forecasting international conference attendance abstract there are many tourism modelling forecasting studies but most of these are concerned with holiday tourism or total tourism ie not disaggregated by visit purpose conference tourism is virtually ignored in this paper an econometric model which explains tourism demand for an international conference is developed the model is specified in logistic form and is estimated using maximum likelihood techniques various alternative forms of the model are considered for the forecasting model selected good empirical results are obtained in terms of model fit and in contrast with previous non conference tourism forecasting findings the forecasts generated by the econometric model are more accurate than random walk forecasts

inequality and the us import demand function in this paper we build a model of trade in vertically differentiated products and find that income inequality can affect the demand for imports even in the presence of homothetic preferences the empirical importance of changes in inequality on the demand for imports is then assessed by examining panel data for 36 developing and developed countries for the 1980 1997 period we find significant evidence supporting our prediction that inequality has a large influence on the demand for imports moreover we find that in line with the predictions of our theoretical model this influence is positive for high income countries countries that produce the high quality variety of the vertically differentiated product and negative for low income countries countries that produce the low quality variety of the vertically differentiated product

shortages segmentation and self selection this paper considers the rationality and implications of using shortages as a self selection device shortages lead to uncertain access and enable sellers to offer ensured access either to the good or to a preferred variety of the good at a higher price or as part of a bundle it is shown that such activities allow firms to span nonconcavities in their revenue function firms respond to changes in demand and costs through changes in quantity and or the premium for ensured access but not through changes in the base price

preventives versus treatments preventives are sold ex ante before disease status is realized while treatments are sold ex post even if the mean of the ex ante distribution of consumer values is the same as that ex post the shape of the distributions may differ generating a difference between the surplus each product can extract if for example consumers differ only in ex ante disease risk then a monopolist would have more difficulty extracting surplus with a preventive than with a treatment because treatment consumers having contracted the disease no longer differ in disease risk we show that the ratio of preventive to treatment producer surplus can be arbitrarily small in particular when the distribution of consumer values has a zipf shape and the disease is rare the firm s bias toward treatments can be reversed for example if the source of private information is disease severity learned ex post the difference between the producer surplus earned from the products can result in distorted rd the deadweight loss from this distortion can be as large as the entire producer surplus difference calibrations for hiv and heart attacks based on risk factors in the u s population suggest that the distribution of disease risk is sufficiently zipf similar to generate substantial differences between producer surplus from preventives and treatments empirically we find that proxies for the zipf similarity of the disease risk distribution are associated a significantly lower likelihood of vaccine development but not drug development jel codes o31 l11 i18 d42

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

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

optimal pricing for information goods with piracy and saturation effect we analyze the pricing decision of a firm selling a product for which there is a significant and continuous saturation effect over time and that can be pirated assuming that the firm uses a skimming strategy we solve three profit maximization models given demand that is linearly decreasing in price few prices can be used over the life of the product the effects of both piracy and saturation are combined in the first model in the second model the firm can invest in technology or copyright enforcement to reduce piracy the third model describes the case in which piracy leads to increased awareness of the product and increased demand numerical sensitivity analysis and examples are used to illustrate the results the results indicate that under strong piracy and saturation effects a skimming strategy is suboptimal

monopoly price dispersion under demand uncertainty when a monopolist sets its price before its demand is known then it may set more than one price and limit the availability of its output at lower prices this article adds demand uncertainty and price rigidities to the standard model of monopoly pricing when there are two states of demand and the ex post monopoly price is greater when demand is high then the monopolist s optimal ex ante pricing strategy is to set two prices and limit purchases at the lower price

the role of exchange rates in a popular model of international trade abstract this paper examines the empirical relationship between the real effective exchange rate and the aggregate real trade balance for five major oecd countries in the post bretton woods era a variety of parametric and non parametric techniques are used there is little evidence that the exchange rate significantly affects the trade balance

fashion and sales abstract when there is unpredictable fashion in taste it will be optimal to limit the stock of each variety of a horizontally differentiated durable good if consumers are uncertain about one another s taste they will then accept higher first period prices for perfect matches in order to avoid finding only bad matches on sale thus there exists a mechanism which allows a monopolist to price discriminate inter temporally even when it has predictable clearance sales and consumers are infinitely patient there is no distortion in product selection when this equilibrium arises

comments on pricing research in marketing the state of the art rao s paper provides an account of recent research published in the marketing literature on the subject of pricing the paper contains an impressive bibliographic survey however the formal model proposed by the author as a framework for classifying and assessing the advances and needs in this area of marketing science is rather limited a major shortcoming of this model which appears to epitomize the marketing literature on pricing is the treatment of prices and quantities as unidimensional in other words the model implicitly assumes that purchases of the product under consideration can be characterized by a scalar quantity denoting the number of units purchased while the pricing of any such purchase is determined by a uniform unit price this restriction severely limits the pricing strategies and product types that can be addressed within such a framework for example it excludes two part tariffs and important classes of products involving metered usage service contracts etc in spite of these deficiencies i found the paper very educational its primary value is in highlighting the main research directions of pricing in the marketing literature and in conveying the importance of various pricing issues from the perspective of a leading marketing scientist taking rao s survey as a reference point i will attempt in the remainder of this discussion to examine the marketing perspective on pricing versus the approach prevailing in the economics literature dealing with pricing issues in particular i will try to identify some strengths and weaknesses of these approaches and to suggest possibilities for cross fertilization between the two disciplines with a few possible exceptions it is fair to say that the marketing literature on pricing typically focuses on developing pricing strategies for the firm and therefore treats prices as control variables the economics literature on the other hand approaches pricing from the perspective of industrial organization theory its primary objectives are to

exchange rates and prices the adjustment of relative prices to exchange rate movements is explained in an industrial organization approach given labor costs in the respective currencies exchange rate movements change costs for firms selling in the home market and thus disturb the industry equilibrium the extent of absolute and relative price adjustment is shown to depend on market integration product substitutability the relative number of domestic and foreign firms and the market structure the impact of exchange rates on prices is illustrated in a variety of approaches including the cournot a dixit and j stiglitz 1977 and s salop 1979 models some empirical evidence is offered in support of the theory copyright 1987 by american economic association

multilevel demand subscription pricing for electric power abstract this paper investigates a general demand subscription pricing policy for electric power service ie a menu of service contracts for assigning different interruption probabilities and prices to different load levels this interruptibility feature is combined with a nonlinear energy price schedule to encourage load flattening we derive a customer value model and a weighted sum objective function for the supplier and consumers for selecting optimal price structures of this type the general form of the optimal price policy is derived and discussed and the implementation methodology is outlined an illustrative example is solved in detail