interpreting economic time series this paper explores some of the implications for econometric practice of the principle that people s observed behavior will change when their constraints change in dynamic contexts a proper definition of people s constraints includes among them laws of motion that describe the evolution of the taxes they must pay and the prices of the goods that they buy and sell changes in agents perceptions of these laws of motion or constraints will in general produce changes in the schedules that describe the choices they make as a function of the information that they possess until very recently received dynamic econometric practice ignored this principle the practice of dynamic econometrics should be changed so that it is consistent with the principle that people s rules of choice are influenced by their constraints this is a substantial undertaking and involves major adjustments in the ways that we formulate estimate and simulate econometric models

information and incentives in computing services supply the effect of limited system choices abstract every organization has only limited computing resources that need to be shared by members of the organization rationing mechanisms such as pricing usually are used to regulate the demands for such resources however to derive an effective mechanism for determining the usage or the scale of an organization s computing service is difficult since there are many informational and incentive problems that need to be overcome by incorporating these problems into a game theoretic model this study analyzes the effects of limited system choices on an organization s net value generated from computing service based on the mechanism design approach the optimal incentive compatible mechanism is derived and contrasted with the case where the is department is evaluated as a profit center the results show that limited system choices can have significant effects on the value generated by an organization s computing service also depending on whether the is department is governed by the optimal mechanism or is evaluated as a profit center the effects oflimited system choices can be different managerial implications derived from the study are provided

cost allocation revisited an optimality result the resource manager of a firm is faced with capacity and pricing decisions with regard to a congestion prone system such as computer communication facilities difficulties arise since the manager is uninformed of the system demand when the capacity decision is to be made a game theoretic model is developed to analyze the effects of different accounting rules on the elicitation of relevant information and ex post efficiency in acquisition and allocation decisions the key result is that the cost allocation method aided by an anonymous reporting scheme is indeed as asserted by zimmerman zimmerman j 1979 the costs and benefits of cost allocations accounting rev 54 july 504 521 a full information efficient rule achieving optimality both in acquisition and allocation decisions discussions of the main assumptions underlying this result are provided

on the price of anarchy in a single server queue with heterogeneous service valuations induced by travel costs abstract this work presents a strategic observable model where customer heterogeneity is induced by the customers locations and travel costs the arrival of customers with distances less than x is assumed to be poisson with rate equal to the integral from 0 to x of a nonnegative intensity function h in a loss system m g 1 1 we define the threshold nash equilibrium strategy xe and the socially optimal threshold strategy x we investigate the dependence of the price of anarchy poa on the parameter xe and the intensity function for example if the potential arrival rate is bounded then poa is bounded and converges to 1 when xe goes to infinity on the other hand if the potential arrival rate is unbounded we prove that x xe always goes to 0 when xe goes to infinity and yet in some cases poa is bounded and even converges to 1 if h converges to a positive constant then poa converges to 2 if h increases then the limit of poa is at least 2 whereas if h decreases then poa is bounded and the limit of poa is at most 2 in a system with a queue we prove that poa may be unbounded already in the simplest case of uniform arrival

trade and foreign investment policies under imperfect competition lessons for developing countries abstract the 1980s saw the emergence of a large literature on the role of trade policy in market structures characterized by imperfect competition this paper contributes to that literature by providing a unified treatment of the effects of trade and foreign investment policy under imperfect competition using a model easily accessible to non specialists we examine the circumstances under which trade and direct foreign investment dfi are immiserizing and identify the appropriate forms of intervention by a welfare maximizing government our positive analysis shows how depending on parameter values monopoly or duopoly situations arise as equilibrium market structures possibly involving dfi our normative analysis shows that while free trade and unrestricted dfi may be welfare reducing neither tariffs nor restrictions on dfi are first best instruments to increase welfare the paper concludes with an assessment of the lessons of the new literature for trade and dfi policy formulation in developing countries

optimal prices of a job shop with a single work station a discrete time model abstract the topic is the optimal control of input to a discrete time fifo job shop with a single work station the input is jobs with known processing times the control is exercised by charging a price for each completed job the objective is either profit maximization or welfare maximization the markov decision processes that maximize the two objectives are studied simultaneously the decision points are the equally spaced epochs in which customers make requests for service of jobs at each decision point the state is the shop s work backlog and the action prescribes the price as a function of the processing time optimal prices are specified in terms of opportunity costs the opportunity cost of a job is the expected future loss of earnings caused by having the job submitted to the shop results for the cases with and without discounting are established simultaneously mild assumptions ensure that the opportunity cost is i increasing as a function of the work backlog and ii increasing and convex as a function of the processing time the opportunity costs are discounted sums of difference values these may be computed by policy iteration by value iteration or by a new fixed point algorithm

liberalization quality and welfare removing the italian ver on japanese car exports the empirical evidence that evaluates ex post the effects of trade policy confirms the presumption well known in theory that quantitative barriers to trade have an impact on the average quality of exports yet in evaluating ex ante the effects of trade policy reform very few studies take into account the role of the induced change in quality the paper evaluates the effects of liberalization in the italian car market through a calibrated model where the choice of the quality of exports is made endogenous simulating the removal of the ver on japanese exports there are substantial gains from liberalization when only quantity effects are considered results change dramatically if quality effects are taken into account the downgrading in japanese exports entails a strong reduction in consumers gains

optimal trade policy under oligopoly a calibrated model of the europe japan rivalry in the eec car market this paper was originally presented at the cefi conference on imperfect competition and international trade aix en provence france june 18 19 1987 we wish to thank avinash dixit who gave the initial impetus to this research we are also grateful to alexis jacquemin and paul krugman for valuable discussion and comments we thank also the french commissariat au plan for financial support and the chambre syndicale des constructeurs automobiles csca for gracious assistance

import demand with rational expectations estimates for bauxite cocoa coffee and petroleum abstrac t we offer a method for establishing the distributed lag structure in import demand models a priori we consider a firm which imports raw materials in a world of uncertainty traditional considerations of adjustment and inventory holding costs lead to a forward looking import decision rule linear rational expectations modelling allows us to transform the forward looking rule into a finite distributed lag specification while the resulting model is similar in form to earlier empirical models it is not subject to the lucas critique the model is fitted to u s data over the period 1954 1980

targeted export promotion with several oligopolistic industries abstract we study export promotion policies in situations where several oligopolistic industries compete for the services of a sector specific factor of production the partial equilibrium argument for strategic subsidies must be modified to incorporate general equilibrium effects working through the factor market we find that these effects generally weaken the case for profit shifting subsidies in a benchmark case with symmetric exporting industries fixed coefficients technologies and an inelastic supply of the specific factor free trade is shown to be optimal

stability and chaos in input pricing for a service facility with adaptive customer response to congestion we consider the stability of the equilibrium arrival rate and equilibrium admission price at a service facility using a generalization of an input pricing model introduced by dewan and mendelson and further examined by stidham at the equilibrium the marginal value of service equals the admission price that is the sum of the admission fee and the expected delay cost stability means roughly that the system returns to the equilibrium after a perturbation assuming the customers base their join balk decisions on previous prices we extend the discrete time dynamic system pricing model of stidham to allow adaptive expectations in which customers predict the future price based on a convex combination of the current price and the previous prediction we show that this can lead to chaotic behavior when the equilibrium is unstable that is the price and arrival rate can follow aperiodic orbits which appear to be completely random our results suggest an alternative explanation for observed variations in the mean arrival rate to a queueing system which are often modeled by means of a random exogenous e g markovian environment process

nonlinear pricing of information goods this paper analyzes optimal pricing for information goods under incomplete information when both unlimited usage fixed fee pricing and usage based pricing are feasible and administering usage based pricing may involve transaction costs it is shown that offering fixed fee pricing in addition to a nonlinear usage based pricing scheme is always profit improving in the presence of nonzero transaction costs and there may be markets in which a pure fixed fee is optimal this implies that the optimal pricing strategy for information goods is almost never fully revealing moreover it is proved that the optimal usage based pricing schedule is independent of the value of the fixed fee a result that simplifies the simultaneous design of pricing schedules considerably and provides a simple procedure for determining the optimal combination of fixed fee and nonlinear usage based pricing the introduction of fixed fee pricing is shown to increase both consumer surplus and total surplus the differential effects of setup costs fixed transaction costs and variable transaction costs on pricing policy are described these results suggest a number of managerial guidelines for designing pricing schedules for instance in nascent information markets firms may profit from low fixed fee penetration pricing but as these markets mature the optimal pricing mix should expand to include a wider range of usage based pricing options minimum fees quantity discounts and adoption levels across the different pricing schemes are characterized strategic pricing responses to changes in market characteristics are described and the implications of the paper s results for bundling and vertical differentiation of information goods are discussed

cost based transfer pricing under r d risk aversion in an integrated supply chain abstract this paper examines the economic role of transfer pricing for a vertically integrated supply chain when a risk averse production division manager faces uncertainty on the outcomes from r d investment in particular we compare two representative cost based transfer pricing methods full cost and variable cost pricing we construct an economic model based on the assumption that r d investment reduces the expected fixed costs of a production factor as well as the variable production costs we show that a firm s profit under full cost transfer pricing is greater than that under variable cost transfer pricing under certainty contrary to this benchmark result variable cost pricing becomes more profitable than full cost pricing when the risk averse manager bears relatively high risk

price and income elasticities of disaggregated import demand results from uecms and an application this paper presents an empirical analysis of the demand for maize milk powder butter and rice imports in cyprus using annual time series data covering the period 1975 1994 none of these products is produced in cyprus and all the necessary quantities are imported to meet domestic demand the primary objective of the paper is to derive long run price and income elasticities of import demand that can be used to analyse the impact of various policies such as the adoption of the common agricultural policy cap when and if the republic of cyprus joins the european union eu in so doing the paper takes on board some recent developments in time series econometrics the cointegration test used the bounds test is a recent test and is based on the estimation of an unrestricted error correction model uecm parsimonious models were derived using hendry s general to specific approach the estimated elasticities were subsequently used to quantify some of the implications for cyprus had the cap been ope

capacity and lead time management when demand for service is seasonal and lead time sensitive in today s competitive business environment quick service with minimal waiting time is an important factor for customers when choosing a service many service organizations guarantee a uniform lead time to all customers in order to gain competitive advantages in the market in selecting a lead time to quote the firm has to take into consideration not only how customers will react to the delivery time guarantee but also whether it has adequate capacity to fulfill the commitment a short lead time can bring both benefits and costs it can increase customer demand but might require a higher capacity level we present a mathematical model and a solution method for determining the optimal quoted lead time and capacity level for a profit maximizing firm with time varying and lead time sensitive demand the firm incurs convex capacity costs and pays lateness penalties whenever the actual lead time exceeds the quoted lead time a few studies have been conducted on the relationship between uniform lead time capacity demand and overall profitability however none of them takes the time variation of demand into account our work differs from previous research in that we explicitly model such a demand pattern

optimal prices of an m g 1 jobshop this paper concerns the optimal control of input to a fifo jobshop with a single workstation the input is jobs for which the processing and delivery times are observable upon arrival the control is exercised by charging a price for each completed job the objective is either profit maximization or welfare maximization the semi markov decision processes that maximize the two objectives are studied simultaneously optimal prices are specified in terms of opportunity costs the opportunity cost of a job is the expected future loss of earnings caused by having the job submitted to the shop results for the cases with and without discounting are established simultaneously by a new approach it is based on the idea of studying the infinite horizon model directly and it allows the state space and the decision set to be denumerable mild assumptions ensure that the opportunity cost is increasing as a function of the work backlog and increasing and convex as a function of the processing time

dynamic pricing for network service equilibrium and stability consider a data communication network owned and operated by a single organization the network has an infinite number of small users and is managed by a system manager sm whose objective is to maximize the net value of the system as a whole the objective of this paper is to study pricing mechanisms that induce the optimal arrival rates when the sm has no full knowledge of the demand in advance we investigate the system behavior under three alternative dynamic pricing rules and users expectations models and characterize the equilibrium and its stability conditions

transfer pricing of a service department facing random demand copyright c 1996 elsevier science b v all rights reserved most servic departments have occasionally idle capacity and occasionally saturated capacity the reason for these phenomena is that a service department faces a random demand for the service it renders how shall its transfer pricing be influenced by this randomness we discuss this question by analyzing an abstract model of a service department the model depicts a service department as an m d 1 queueing system with an upper limit ul on the time in the system potential input to the system is operating departmentsr requests for service which arise according to a poisson process all requests for service take the same amount of time the net benefit defined as the benefit minus any direct costsr of satisfying a request is uniformly distributed and is known at the time the request materializes if the net benefit is larger than the net transfer price defined as the transfer price minus any direct costsr and the delivery time does not exceed ul then the request is submitted to the service department we develop two algorithms to find the optimal transfer pricing and the best simple transfer price respectively numerical computations indicate that the expected net benefits earned per unit time by employing the solutions found by the two algorithms differ by at most 3 we also investigate the relationship between the best simple net transfer price and the cost of service capacity

corporate tax systems multinational enterprises and economic integration abstract multinational firms are known to shift profits and countries are known to compete over shifty profits two major principles for corporate taxation are separate accounting sa and formula apportionment fa these two principles have very different qualities when it comes to preventing profit shifting and preserving national tax autonomy most oecd countries use sa in this paper we show that a reduction in trade barriers lowers equilibrium corporate taxes under sa but leads to higher taxes under fa from a welfare point of view the choice of tax principle is shown to depend on the degree of economic integration

international oligopoly and the taxation of commerce with revenue constrained governments we evaluate the incentives for strategic commodity tax setting under destination and origin regimes when competition is imperfect and commodity taxes must be used to finance the government budget different cases of international duopoly are compared where firms compete over quantities or prices and markets are segmented or integrated in each setting the international spillovers of tax policy are isolated and evaluated at the pareto efficient tax rate we find that origin based commodity taxation leads to a downward competition of tax rates in each of the models analysed whereas no similarly broad based incentives for beggar thy neighbour policies exist under the destination principle

competition and outsourcing with scale economies scale economies are commonplace in operations yet because of analytical challenges relatively little is known about how firms should compete in their presence this paper presents a model of competition between two firms that face scale economies i e each firm s cost per unit of demand is decreasing in demand a general framework is used which incorporates competition between two service providers with price and time sensitive demand a queuing game and competition between two retailers with fixed ordering costs and pricesensitive consumers an economic order quantity game reasonably general conditions are provided under which there exists at most one equilibrium with both firms participating in the market we demonstrate in the context of the queuing game that the lower cost firm in equilibrium may have a higher market share and a higher price an enviable situation we also allow each firm to outsource their production process to a supplier even if the supplier s technology is no better than the firms technology and the supplier is required to establish dedicated capacity so the supplier s scale can be no greater than either firm s scale we show that the firms strictly prefer to outsource we conclude that scale economies provide a strong motivation for outsourcing that has not previously been identified in the literature

sensitivity of optimal prices to system parameters in a steady state service facility we consider the problem of maximizing the long run average reward in a service facility with dynamic pricing we investigate sensitivity of optimal pricing policies to the parameters of the service facility which is modelled as an m m s k queueing system arrival process to the facility is poisson with arrival rate a decreasing function of the price currently being charged by the facility we prove structural results on the optimal pricing policies when the parameters in the facility change namely we show that optimal prices decrease when the capacity of the facility or the number of servers in the facility increase under a reasonable assumption we also show that optimal prices increase as the overall demand for the service provided by the facility increases or when the service rate of the facility decreases we illustrate how these structural results simplify the required computational effort while finding the optimal policy

concurrent pricing and lot sizing for make to order contract production abstract this paper develops a model for the simultaneous i e concurrent determination of the inventory and pricing policies of a supplier which produces and supplies a product to a buyer on the basis of a contractual agreement calling for the delivery of a specific quantity periodically assuming that the customer is rational i e it follows its own optimal purchasing policy the objective of the supplier is to determine the product s selling price in conjunction with an appropriate production inventory policy so that a predetermined gross profit level is achieved it is further assumed that the supplier s production batch size is an integer multiple of the buyer s order quantity in formulating a mathematical model of this situation the interactions between the product s price the buyer s economic order quantity and the supplier s selling price costs and profit are taken into account for solving this model a simple iterative algorithm is proposed which is illustrated through a numerical example sensitivity analysis performed on the model demonstrates that it is relatively robust and quite insensitive to errors in estimating the buyer s ordering to carrying cost ratio on the part of the producer

gray market trade with product information service in global supply chains abstract this paper investigates the economic effects of a product information service when potential consumers who are segmented by their taste exist in gray markets specifically we construct an economic model that considers a multinational firm mnf who expands business to a country and chooses whether to provide information service regarding product characteristics if receiving the information consumers in a specific segment whose taste suits the characteristics have positive utility from consuming the product while those in other segments have no utility by contrast consumers in all segments have positive expected utility before consuming the product without information with these settings we demonstrate that there arises the equilibrium that the mnf provides no information service when gray market trade i e parallel trade is allowed in the country leading to lower consumer welfare than when it is prohibited a primary finding in the equilibrium is that such a situation arises especially when potential consumers are less segmented in this situation the regulator in the country should ban the parallel imports so as to enhance consumer welfare the result is counterintuitive and notable because one might intuitively infer that gray market trade is less desirable when customers are more minutely segmented and the product information service is thus more specific and necessary

testing dynamic specification for import demand models the case of cotton error correction models impose few prior restrictions on dynamic model specification and allow the data to determine model structure despite this obvious advantage few applications have adopted the error correction model to explain trade flows an error correction model of cotton import demand is estimated for france japan and hongkong a variety of tests are applied to determine the dynamic structure of the model it is found that the most general models are those that best fit the data for cotton import demand long run elasticities from these general models are significantly different than elasticities derived from a comparable static model

optimal internal pricing and capacity planning for service facility with finite buffer abstract an economic model is developed for exploring optimal internal pricing and capacity planning for service facility with finite buffer capacity because of the limited buffer capacity jobs finding the system full upon their arrival would be rejected such rejections create a gap between the value collectively perceived by users and the actual achievement of the organizational value this gap called a loss externality has never been studied before and plays an important role for designing optimal pricing scheme in general the underlying economic structure may involve multiple equilibria and it is unclear whether or not the system can be controlled through internal pricing in this regard a sufficient condition is given under which the system administrator can find two separate prices for accepted and rejected users at any demand level to be desired so that the desired demand level becomes the unique equilibrium of the system for a short run problem it is shown that the optimal pricing scheme can be expressed as the sum of the congestion and the loss externalities for a long run problem the optimal pricing scheme is expressed in a unified manner so that a structural relationship between the short run problem and the long run problem at optimality can be readily observed a necessary and sufficient condition is also given for the marginal capacity pricing to be optimal i e the optimal long run pricing consists of the marginal cost for processing capacity and the marginal cost for buffer capacity without involving any externality at all

pricing and lead time decisions in decentralized supply chains this paper studies a decentralized supply chain consisting of a supplier and a retailer facing price and lead time sensitive demands a stackelberg game is constructed to analyze the price and lead time decisions by the supplier as the leader and the retailer as the follower the equilibrium strategies of the two players are obtained using the performance of the corresponding centralized system as a benchmark we show that decentralized decisions in general are inefficient and lead to inferior performance due to the double marginalization effect however further analysis shows that the decision inefficiency is strongly influenced by market and operational factors and if the operational factors are dominating it may not be significant this shows that before pursuing a coordination strategy with retailers a supplier should first improve his or her own internal operations

externalities tangible externalities and queue disciplines externalities are the marginal costs that a user of a common resource imposes on others we introduce the efficient measure of tangible externalities that are the costs that a user imposes on others while being served then for a single server queueing system under various service disciplines we compute the expected externalities and the expected tangible externalities conditioning on the length of the service requirement

adjustment costs and import demand behavior evidence from canada and the united states abstract in this paper we examine whether adjustment costs are a significant source of the observed sluggish adjustment of canadian and us import demand we use a simple model of a utility maximizing domestic consumer under the assumption of integrated forcing variables to examine the importance of adjustment costs this formulation of the problem allows us to exploit the recently developed theory of cointegration to estimate the structural parameters of the model using a two step methodology moreover the formulation incorporates an element of forward looking behaviour into the decision process a feature that is important if one assumes adjustment costs are a significant source of persistence in import demand adjustment the empirical results from a euler equation imply that adjustment costs in canada and the united states are important

price delivery time guarantees and capacity selection this paper studies the impact of using delivery time guarantees as a competitive strategy in service industries where demands are sensitive to both price and delivery time we assume that delivery reliability is crucial and investment in capacity expansion is plausible in order to maintain a high probability of delivering the time guarantee a mathematical framework is proposed to understand the interrelations among pricing delivery time guarantee and capacity expansion decisions specifically an optimization model is developed to determine the joint optimal selection of these three important decision variables with an objective of maximizing the average net profit we characterize the optimal decisions and study their qualitative behaviors as various parameters change we further present a numerical example to illustrate how the results of our model can be used to provide useful managerial insights for selecting the best competing strategies for firms with different operating characteristics our model and results are also applicable to a make to order manufacturing environment

user delay costs and internal pricing for a service facility this paper studies optimal pricing and capacity decisions for a service facility in an environment where users delay cost is important the model assumes a general nonlinear delay cost structure and incorporates the tradeoff between the delay cost and capacity cost we find necessary and sufficient conditions for the optimality of a pricing rule that charges out service resources at their marginal capacity cost we examine the issue of budgetary balance and find that net value maximization entails a budget deficit for the service facility that is the service facility should be evaluated as a deficit center the results provide guidelines under which the optimal magnitude of the deficit can be determined

pricing and capacity decisions for a service facility stability and multiple local optima we consider a model for optimal pricing and capacity for a service facility the problem is formulated as one of optimal design of a single server queueing system in which the design variables are the service rate and the arrival rate equivalently the price charged for admission the model is a variant of one introduced by dewan and mendelson we allow for an upper bound on the arrival rate and consider slightly more general user value functions we show that an optimal solution may not lie in the interior of the feasible region and thus may not be characterized by the first order differential conditions moreover the first order conditions typically have several solutions some of which may be relative minima and produce a negative value of the objective function customer value minus the sum of expected delay cost and capacity cost per unit time we also examine the stability of the equilibrium arrival rate and the convergence of a dynamic adaptive algorithm for finding the optimal service rate in the context of a model in which the distribution of customers value of service is uniform we show that the equilibrium arrival rate is stable if and only if the service rate is above a threshold value which depends on the price charged for admission and the parameters of the uniform distribution of value of service the dynamic adaptive algorithm always converges to a relative maximum of the objective function if the service rate can be adjusted every time the arrival rate changes otherwise the algorithm will start to diverge if and when the service rate ever falls below the threshold value associated with stability of the equilibrium arrival rate

incentive compatible pricing for a service facility with joint production and congestion externalities this paper considers the pricing problem of a service facility when services are jointly produced by the customers and the facility building on the work of mendelson 1985 we model the facility as a gi gi 1 queue with customer chosen service rates and linear delay costs we show that the service rates chosen by the customers based on their self interest are always suboptimal for the facility due to congestion externalities we derive optimal incentive compatible pricing schemes that can achieve optimal arrival rates and induce customers to choose optimal service rates for the case of systemwide net value maximization we show that the optimal incentive compatible pricing scheme consists of a variable fee that is proportional to the actual service time and a fixed rebate that is equal to a customer1s expected delay cost in the queue for the case of profit maximization of the facility we show that the optimal pricing scheme again consists of a fixed fee and a variable fee one insight from our analysis is that it may be appropriate for a service facility to reimburse each customer for his actual delay cost in the queue

the closed loop motive for voluntary export restraints this paper examines the effects of voluntary export restraints in a dynamic game model of duopolistic competition it is shown that the imposition of a voluntary export restraint at the free trade level of imports increases the market price and the profits of all firms in the industry if free trade is identified as the closed loop subgame perfect cournot equilibrium of the game hence the authors conclude that the predictions of static cournot competition do not carry over to the dynamic case

bilateral trade elasticities this paper estimates income and price elasticities for bilateral world trade in addition to testing the properties of the error terms the dynamic specification and the assumption of parameter constancy the analysis presents the first application of the bank spectrum estimator to bilateral trade flows for all countries the paper finds that bilateral trade elasticities exhibit enough of a dispersion to suggest that the direction of trade is sensitive to changes in income and prices using the bilateral elasticities as raw data the analysis obtains the associated multilateral estimates and finds that they are both consistent with the literature and suitable to addressing questions involving multilateral trade but the evidence also reveals that sole reliance on multilateral elasticities conceals valuable information for both policy applications and empirical analyses of international trade copyright 1990 by mit press

cost allocation and opportunity costs one explanation for the widespread use of allocated fixed costs is that they can serve as a proxy for difficult to calculate opportunity costs this explanation is pursued by modeling a service department as an m m s s queueing system two main results are that the expected value of opportunity costs equals both the incremental productivity of capacity and the optimal transfer price when the cost of capacity is of the form cs as and is close to one we show that allocated fixed costs are a good proxy for average opportunity costs however if there are great economies of scale is close to zero then a method which charges users only for the variable costs of the service department is recommended finally the economic efficiency of transfer prices based on either variable cost or full cost is compared with optimal transfer pricing policies

integration of capacity pricing and lead time decisions in a decentralized supply chain abstract we consider a decentralized supply chain consisting of a supplier and a retailer facing price and lead time sensitive demand the decision process is modelled by a stackelberg game where the supplier as a leader determines the capacity and the wholesale price and the retailer as a follower determines the sale price and lead time the equilibrium strategy of these two players is obtained by comparing with the performance of the corresponding decentralized chain without capacity decision as a benchmark we characterize the impact of capacity decision on the players profit i e the supplier s profit may be always significantly increased while the retailer s profit is only increased when the capacity is underestimated in the benchmark model further we demonstrate that the integration of capacity decision can also significantly reduce the profit loss caused by double marginalization finally we find that the revenue sharing and two part tariff contracts cannot coordinate the decentralized channel instead we propose a franchise contract with a contingent rebate that can achieve channel coordination and a win win outcome

relevant costs congestion and stochasticity in production environments abstract conventional management accounting principles used to evaluate relevant costs have been developed under the assumption of deterministic manufacturing settings manufacturing operations however are complex and stochastic in this paper we examine the impact of stochasticity in the production process on relevant costs based on a dynamic assessment of capacity constraints we develop a model to analyze the behavior of relevant costs with respect to changes in the expected duration and variability in set ups and processing an implication of this analysis is that for profit maximization capacity will exceed expected demand if production rates or demand are stochastic

investigating sensitivity and the impact of information on pricing decisions in an m m 1 queueing model we consider a model for optimal pricing for a job shop the problem is formulated as a single server queueing model where an arriving customer enters the system if his reward drawn from a stochastic variable exceeds the sum of the price charge of his job plus the expected waiting costs the optimal price is found with respect to profit optimization and welfare optimization two models are formulated the first model called ninf contains only steady state queue information the other model called ql contains more detailed information because here an arriving customer is informed about the number of customers already in the system the main interpretation of the models is how complex an information system should the job shop provide to its customers we show that for both criteria functions it pays off except for a special case to use the more detailed information system in the paper we also investigate how sensitive the pricing decision and its outcome on the criteria functions are on the variance of the reward distribution which in the paper is assumed to be uniformly distributed concerning welfare optimization we show that a decreased variance always results in a decreased welfare contribution while concerning profit optimization a decreased variance can result in both a decreased as well as an increased profit contribution

price quality and welfare effects of european vers on japanese autos abstract this paper examines the impact of the vers negotiated by the u k france and germany with japanese car makers market share analysis shows that the vers did not arrest the declines in apparent consumption by local producers further analysis from a sample of japanese and other cars sold on the french and german markets indicates quality upgrading between 1981 and 1983 the data also suggest that the ver was strictly binding in france starting around 1984 but not in germany until 1985 the end of the sample period finally the paper shows that the french german and japanese car producers supplied an increasingly similar product mix on the french market throughout the sample period 1979 1985 but the italian producers shifted towards a lower fiscal horsepower mix

foreign direct investment under oligopoly profit shifting or profit capturing abstract in this paper a model of taxation of foreign source corporate income is developed when the output market is not perfectly competitive profit shifting policies similar to those in the new trade literature are also present in the case of foreign direct investment fdi there are however important differences to the new trade theory since in case of fdi i corporate taxation and double taxation relief are the policy instruments rather than output or revenue taxes ii countries are not symmetric in the sense that the host country has the first right to tax the multinational s profit and the home country reacts by providing double taxation relief and iii output but not corporate taxation is specific to imperfectly competitive industries it is argued that a variants of a tax credit are analogous to export subsidies b when the home country operates a tax credit system the host country s incentive to capture the multinational s profit is bounded under imperfect competition c when the host country offers a tax holiday the home country should imitate this policy and d in the presence of perfect competitive industries double taxation relief is a good instrument to target imperfectly competitive industries

optimal static pricing for a service facility with holding costs we study a service facility modelled as a single server queueing system with poisson arrivals and limited or unlimited buffer size in systems with unlimited buffer size the service times have general distributions whereas in finite buffered systems service times are exponentially distributed arriving customers enter if there is room in the facility and if they are willing to pay the posted price the same price is charged to all customers at all times static pricing the service provider is charged a holding cost proportional to the time that the customers spend in the system we demonstrate that there is a unique optimal price that maximizes the long run average profit per unit time we also investigate how optimal prices vary as system parameters change finally we consider buffer size as an additional decision variable and show that there is an optimal buffer size level that maximizes profit

international r d rivalry and industrial strategy this paper presents a theory of government intervention which provides an explanation for industrial strategy policies such as r d or export subsidies in imperfectly competitive international markets domestic net welfare is improved by the capture of a greater share of the output of rent earning industries although the subsidy ridden noncooperative international equilibrium is jointly suboptimal behaviour of governments and firms is modelled as a three stage subgame perfect nash equilibrium the assumption that the government is the first player in this game allows it to influence equilibrium outcomes by altering the set of credible actions open to firms

tax competition in imperfectly competitive markets abstract the literature on strategic trade policy has shown that in imperfectly competitive markets governments have an incentive to subsidize exports of their own firms yet the consequence of the departure from laissez faire is a wasteful subsidy race in contrast this paper shows that even in imperfectly competitive markets there is a strong tendency for laissez faire to prevail the driving force is the firms willingness to exploit tax or subsidy differentials by relocating production a small tax differential induces firms to change their place of production the change in market structure has a negligible effect on the oligopoly equilibrium but a non negligible impact on government revenues when tax policy is non discriminatory governments gain lose by attracting all firms when production is taxed subsidized hence laissez faire is the only equilibrium since from the point of view of the two producing countries laissez faire nondiscrimination pareto dominates the intervention equilibrium discrimination nondiscrimination is a simple device to result in a mutual beneficial outcome

competition in multiechelon assembly supply chains in this paper we study competition in multiechelon supply chains with an assembly structure firms in the supply chain are grouped into homogenous sectors nodes that contain identical firms with identical production capabilities that all produce exactly one undifferentiated product that may itself be a kit of components each sector may use several inputs to produce its product and these inputs are supplied by different sectors the production process within any sector is taken to be pure assembly in fixed proportions the number of firms in each sector is known the demand curve for the final product is assumed to be linear as are production costs in all sectors competition is modeled via a coordinated successive cournot model in which firms choose production quantities for their downstream market so as to maximize profits given prices for all inputs and all complementary products production quantities for sectors supplying the same successor are coordinated through pricing mechanisms so that complementary products are produced in the right proportions under these assumptions equilibrium prices for any multiechelon assembly network are characterized by a system of linear equations we derive closed form expressions for equilibrium quantities and prices in any two stage system i e a system with multiple input sectors and a single assembly sector we show that any assembly structure can be converted to an equivalent larger structure in which no more than two components are assembled at any node finally large structures can be solved either by direct solution of the characteristic linear equations or through an iterative reduction compression to smaller structures

distributed lags and intermediate good imports abstract in this paper we draw upon some recent developments in the theory of dynamic economics and econometrics to characterize the time series behavior of intermediate good imports it is shown that adjustment costs delivery lags and inventory holding costs considerations lead to distributed lag import demand functions that are not subject to the nerlove 1972 and lucas 1976 critiques of ad hoc and fixed distributed lag modelling