strategic capacity rationing to induce early purchases dynamic pricing offers the potential to increase revenues at the same time it creates an incentive for customers to strategize over the timing of their purchases a firm should ideally account for this behavior when making its pricing and stocking decisions in particular we investigate whether it is optimal for a firm to create rationing risk by deliberately understocking products then the resulting threat of shortages creates an incentive for customers to purchase early at higher prices but when does such a strategy make sense if it is profitable to create shortages what is the optimal amount of rationing risk to create we develop a stylized model to study this problem in our model customers have heterogeneous valuations for the firm s product and face declining prices over two periods customers are assumed to have identical risk preferences and know the price path and fill rate in each period via its capacity choice the firm is able to control the fill rate and hence the rationing risk faced by customers customers behave strategically and weigh the payoff of immediate purchases against the expected payoff of delaying their purchases we analyze the capacity choice that maximizes the firm s profits first we consider a monopoly market and characterize conditions under which rationing is optimal we examine how the optimal amount of rationing is affected by the magnitude of price changes over time and the degree of risk aversion among customers we then analyze an oligopoly version of the model and show that competition reduces the firms ability to profit from rationing indeed there exists a critical number of firms beyond which a rationing equilibrium cannot be supported

optimal dynamic price selection under attraction choice models abstract we present a single resource finite horizon markov decision process approach for a firm that seeks to maximize expected revenues by dynamically adjusting the menu of offered products and their prices to be selected from a finite set of alternative values predetermined as a matter of policy consumers choose among available products according to an attraction choice model a special but widely applied class of discrete choice models the fractional substructure inherent to attraction choice models enables the derivation of structural properties that significantly simplify the computation of an optimal policy we show that the more capacity or less time is remaining the lower are the optimal prices we develop an exact solution procedure for preprocessing and recursively solving price selection problems that clearly outperforms current revenue management approaches with respect to computational complexity furthermore we demonstrate that the potential revenue improvements from dynamic compared to fixed pricing can be significant ranging from 4 5 up to 149 for selected examples from the literature extensions to multiple resources and to related discrete choice models are discussed

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

some evidence on herding behavior of u s banks the authors examine the international lending decisions of u s commercial banks of different sizes from 1977 to 1982 for evidence ofthe ex istence of herding behavior granger sims causality tests for the loans gran ted by the top nine the next fifteen and the remaining u s banks provide no c lear evidence of herding between the top nine and the next fifteen banks there is however evidence that the remaining banks mostly small ones herded behind the top twenty four banks overall the analysis presented here points to a very weak herding behavior copyright 1987 by ohio state university press

order splitting with multiple capacitated suppliers this paper studies an integrated decision making model for a supply chain system where a manufacturer faces a price sensitive demand and multiple capacitated suppliers two issues that are often considered separately in the literature the goal is to maximize total profit by determining an optimal selling price and at the same time acquiring enough supplying capacity the problem is proved to be np hard in the ordinary sense a heuristic algorithm and an optimal dynamic programming algorithm are developed computational experiments are conducted to study the efficiency and effectiveness of the algorithms some managerial insights are observed

coordination of pricing and multiple period production across multiple constant priced goods this paper addresses the problem of jointly determining prices and production schedules for a set of items that are produced on the same production equipment under the assumptions that the production setup costs are negligible and that demand is seasonal but price dependent we exploit the special structure of the problem to develop a solution procedure through a set of numerical examples we demonstrate how a product s contribution to aggregate seasonality can increase its optimal price our examples also demonstrate that among products that experience demand peaks during the firm s busy season those that peak early in the busy season should be priced more aggressively than those that peak later

the hidden information content of price movements dynamic patterns of prices in different markets may motivate strategic consumers who could be monitoring price movements over time to game vendors do past price movements carry information about the probability and magnitude of future price drops conducting empirical work in the airline industry on near 1000 us domestic routes we find that some price metrics carry information about future price swings these variables can assist in predicting the likelihood and magnitude of price drops these price metrics yield significantly different signals which also vary as the prediction horizon changes

channel coordination and quantity discounts this paper presents a model for analyzing the impact of joint decision policies on channel coordination in a system consisting of a supplier and a group of homogeneous buyers the joint decision policy characterized by the unit selling price and the order quantity is coordinated through quantity discounts and franchise fees both the annual demand rate and the operating cost including the purchase ordering and inventory holding costs depend on the joint decision policy employed this paper contributes by integrating work addressing quantity discounts on inventory and ordering policies and work focusing on the control mechanism provided by quantity discounts in channel coordination it is shown that the optimal all unit quantity discount policy is equivalent to the optimal incremental quantity discount policy in achieving channel coordination furthermore it is shown that quantity discounts alone are not sufficient to guarantee joint profit maximization the analyses of the general models are illustrated by specific analytical results obtained for a given demand function

coordination of pricing and multi period production for constant priced goods this paper addresses the problem of jointly determining a single price and production schedule for a product with seasonal demand under the assumption that the ratio of the demands in any two periods does not depend upon the price at which the product is offered we develop a procedure that guarantees an optimal solution perhaps more importantly however our model provides insight into the manner in which the firm s production cost increases with the intensity of total demand

will dynamic pricing outperform theoretical analysis and empirical evidence from o2o on demand food service market abstract this study attempts to identify the pricing strategy of three most commonly used on demand food service platforms in china based on detailed information of more than 240 000 orders and further evaluates the impact of pricing strategy on platform performance we find that some platforms adopt dynamic pricing strategies while other platforms adopt static pricing strategies considering the unique structure of the o2o on demand food service market in china we develop a dyadic two sided market theory and demonstrate that compared with static pricing strategies dynamic pricing strategies perform better consistent with our theory our empirical analysis also suggests that platforms adopting dynamic pricing strategies have a significantly higher level of demand compared with platforms adopting static strategies in addition our results indicate the importance of delivery speed red envelopes and ratings in promoting demand

international portfolio choice and political instability risk a multi objective approach abstract the benefits derived from international portfolio diversification into foreign nations including the less developed countries are well documented yet this practice is discouraged due to market imperfections such as political instability in practice nations may be differentiated further by many aspects such as border controls or political and social trends which constrain private transactions and financial decisions this paper attempts to examine 1 whether the home asset bias in a portfolio holding is associated with higher political instability risk and 2 to what extent international diversification among stocks in the presence of such risk outperforms domestic stock portfolios using alternative instability risk proxies in the context of a discrete time version of mean variance framework we corroborate the impact of this type of risk on international portfolio investment decisions

an improved model for supplier selection under capacity constraint and multiple criteria abstract ghodsypour and o brien 2001 the total cost of logistics in supplier selection under conditions of multiple sourcing multiple criteria and capacity constraint international journal of production economics 73 1 15 27 study multiple sourcing problem with multiple criteria and capacitated suppliers considering the buyer s quality requirements as a constraint they develop a mixed integer non linear programming model to find the least cost cyclic ordering policy for the buyer they propose to solve the model by enumerating over all possible supplier combinations although the problem is interesting and their analysis is correct we point out two issues with their assumptions namely capacitated suppliers and cyclic ordering policy we discuss two different capacitated supplier settings i long run average annual capacity and ii exact annual capacity first under long run average annual capacity assumption we propose a model which provides the same or a better solution and is much easier to solve than their model then we discuss how to modify our and their models to handle exact annual capacity assumption

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

base stock policies for production inventory problems with uncertain capacity levels abstract in this paper we consider a single item stochastic demand production inventory problem where the maximum amount that can be produced or ordered in any given period is assumed to be uncertain inventory levels are reviewed periodically the system operates under a stationary modified base stock policy the intent of our paper is to present a procedure for computing the optimal base stocl level of this policy under expected average cost per period criterion this procedure would provide guidance as to the appropriate amount of capacity to store in the form of inventory in the face of stochastic demand and uncertain capacity in achieving this goal our main contribution is to establish the analogy between the class of base stock production inventory policies that operate under demand capacity uncertainty and the g g 1 queues and their associated random walks we also present example derivations for some important capacity distributions

adaptive ordering and pricing for perishable products we consider the combined problem of pricing and ordering for a perishable product with unknown demand distribution and censored demand observations resulting from lost sales faced by a monopolistic retailer we develop an adaptive pricing and ordering policy with the asymptotic property that the average realized profit per period converges with probability one to the optimal value under complete information on the distribution the pricing mechanism is modeled as a multiarmed bandit problem while the order quantity decision made after the price level is established is based on a stochastic approximation procedure with multiplicative updates

the time pattern of hedging and the volatility of futures prices the paper proposes a multi period model of hedging which allows for a futures position to be revised within the cash market holding period within this framework we assess the robustness of the two period theory of hedging when generalized to many periods we characterize the normal time path of a hedge and the way it is affected by the requirement that futures accounts mark to market daily finally we show how the resolution of production uncertainty over time affects hedging behavior and determines the volatility of futures prices in the large literature on hedging in futures markets the principal analytical accounts of hedging are framed in a two trade date setting an agent commits himself now to a future purchase or sale of a good whose cash price later is uncertain this risk is hedged by purchase or sale of an appropriate number of futures contracts and holding this futures position until the cash transaction is realized in the present paper we formulate a multi period model of hedging which allows for the futures position to be revised within the cash market holding period the resulting analysis captures an important institutional reality that is absent in a two trade date model namely the fact that the day to day fluctuations of the futures price will generate a series of random cash flows over the period during which a futures position is held this is due to the requirement that futures accounts mark to market daily within this framework we address a number of issues first we assess the robustness of the two period theory of hedging when generalized to many periods second we characterize the normal time path of a hedge and contrast futures and forward contracts from the perspective of an individual hedger finally we show how the resolution of production uncertainty over time affects hedging behaviour and determines the volatility of futures prices while the literature on asset demand in a multiperiod setting is large futures markets are specifically treated in a limited number of studies grauer and litzenberger 1976 are concerned principally with characterizing the relation of spot and futures prices in a market for a storable periodically produced commodity they offer a rationale for positive stock holding in markets where spot price exceeds the futures price richard and sundaresan 1980 are also concerned primarily with characterizing price behaviour since they posit identical consumers in equilibrium individual holdings of futures are zero there is no hedging activity in the sense that we understand it breeden 1980b analyzes the optimal futures position sizes in a multiperiod setting his framework is more general than ours in that his is a multi good multi asset model where preferences

joint pricing and production decisions with yield uncertainty and downconversion abstract we consider a firm who supplies two types of products high end and low end because of the uncertainty in the production process the yield rate of the high end products is uncertain the substandard high end products caused by the yield uncertainty can be transformed into the low end products with a certain cost we characterize the optimal pricing and production decisions and develop an algorithm to compute the optimal solution we also investigate the impact of the yield uncertainty on the firm s performance and explore how stability of market demand emergent fulfillment costs and downconversion cost influence this effect we find that i the profit of the firm deteriorates when the risk of the yield uncertainty is high in the face of yield uncertainty the firm prefers to decrease increase the production quantity of the high end low end products ii when the market demands are quite unstable the emergent fulfillment costs are low or the downconversion cost is high the firm has a low incentive to eliminate the yield uncertainty

causality between export growth and industrial development empirical evidence from the nics a comment abstract in a recent article chow 1987 argued that his empirical evidence supports the hypothesis that export growth causes industrial development in this comment i point out several serious shortcomings of chow s analysis

rational herding in financial economics abstract this paper briefly describes recent papers on the economics of rational herding in financial markets some models can predict perfect herding in which rational agents all act alike without any countervailing force such herding typically arises either from direct payoff externalities negative externalities in bank runs positive externalities in the generation of trading liquidity or in information acquisition principal agent problems based on managerial desire to protect or signal reputation or informational learning cascades the paper also provides a few pointers to related literature and suggests issues to be addressed in future research

demand uncertainty and sales a study of fashion and markdown pricing the theory of clearance sales is expanded and applied to explain why markups markdowns and the frequency of sales of merchandise sold by department stores have increased dramatically in recent years and why they differ across merchandise groups tha major theme of the paper is that the growing role of fashion and product variety is an important reason for these increases and for the differences between merchandise groups the growing importance of fashion is illustrated by documenting the declining use of whites and the increasing use of colors and prints estimates of the effects of imports and technological and demographic changes on markups and markdowns are presented copyright 1988 by american economic association

optimal minimum bids and inventory scrapping in sequential single unit vickrey auctions with demand learning abstract retailers often conduct sequential single unit auctions and need to decide the minimum bid in each auction to reduce inventory costs it may be optimal to scrap some of the inventory rather than holding it until it is auctioned off in some auctions the seller may be uncertain about the market response and hence may want to dynamically learn the demand by observing the number of posted bids we formulate a markov decision process mdp to study this dynamic auction design problem under the vickrey mechanism we first develop a clairvoyant model where the seller knows the demand distribution we prove that it is optimal to scrap all inventory above a certain threshold and then auction the remaining units we derive a first order necessary condition whereby the bidders virtual value at an optimal minimum bid equals the seller s marginal profit this is a generalization of riley and samuelson s result from the one single unit auction case when the virtual value is strictly increasing this necessary condition is also sufficient and leads to a structured value iteration algorithm we then assume that the number of bidders is poisson distributed but the seller does not know its mean the seller uses a mixture of gamma prior on this mean and updates this belief over several auctions this results in a high dimensional bayesian mdp whose exact solution is intractable we therefore propose and compare two approximation methods called certainty equivalent control cec and q function approximation numerical experiments suggest that q function approximation can attain higher revenues than cec

an inventory system with two supply modes and capacity constraints abstract this paper analyses a periodic review inventory system with a main and an emergency supply mode where policies of the base stock type are used at both supply channels contrary to previously published models the capacity of the emergency channel is taken into account we examine two alternative ordering policies for that channel an early ordering policy that almost eliminates early stockouts in a replenishment cycle and a late ordering policy that delays the emergency order decision until more demand information has been accumulated approximate cost models are developed and properties of their optimal solutions are derived simulation results indicate that these solutions are near optimal conclusions are drawn about the relative effectiveness of the two emergency ordering policies

herd behaviour by japanese banks after financial deregulation this paper investigates whether japanese banks followed herd behaviour during the 1980s and 1990s the results indicate the existence of herding during the sample period while the inefficiency of herding is concentrated in the early to mid 1980s the period immediately after financial deregulation began evidence for the inefficient herding is observed in the behaviour of banks that made loans to new borrowers and in the behaviour of banks that followed the type of banks that were more informed on lending to new borrowers on the other hand inefficient herd behaviour is rarely observed in the 1990s

dynamic pricing and ordering decisions by a monopolist this paper considers the relationship between pricing and ordering decisions for a monopolistic retailer facing a known demand function where over the inventory cycle the product may exhibit i physical decay or deterioration of inventory called wastage and ii decrease in market value called value drop associated with each unit of inventory on hand the retailer is allowed to continuously vary the selling price of the product over the cycle we introduce a notion of instantaneous margin and use it to derive profit maximizing conditions for the retailer the model explains the markdown of retail goods subject to decay it also provides guidance in determining when price changes during the cycle are worthwhile due to product aging how often such changes should be made and how such changes affect ordering intervals and quantities

price discrimination through refund contracts in airlines this paper shows how an airline monopoly uses refundable and non refundable tickets to screen consumers who are uncertain about their travel our theoretical model predicts that the difference between these two fares diminishes as individual demand uncertainty is resolved using an original data set from u s airline markets we find strong evidence supporting our model price discrimination opportunities through refund contracts decline as the departure date nears and individuals learn about their demand

monopolist pricing with dynamic demand and production cost this paper deals with pricing of a new product over time by a monopolist who maximizes the discounted profit stream the interdependency of cost and demand on cumulative production makes the problem inherently dynamic cost is assumed to be declining with cumulative production learning curve effect while demand is a function of price and cumulative sales representing word of mouth and saturation effects the paper addresses this problem in a general framework that includes several previous results as special cases and provides new insights in other situations while the learning curve and word of mouth effect cause prices to be lower than the price that maximizes immediate revenues the saturation factor has the opposite effect the price path over time is affected by these factors and the interest rate we characterize the price path under several different situations and interpret the results for policy guidelines

information contagion and bank herding we show that the likelihood of information contagion induces profit maximizing bank owners to herd with other banks when bank loan returns have a common systematic factor the cost of borrowing for a bank increases when there is adverse news on other banks since such news conveys adverse information about the common factor the increase in a bank s cost of borrowing relative to the situation of good news about other banks is greater when bank loan returns have less commonality in addition to the systematic risk factor hence banks herd and undertake correlated investments so as to minimize the impact of such information contagion on the expected cost of borrowing competitive effects such as superior margins from lending in different industries mitigate herding incentives

optimal inventory policies when purchase price and demand are stochastic in this paper we consider the problem of a firm that faces a stochastic poisson demand and must replenish from a market in which prices fluctuate such as a commodity market we describe the price evolution as a continuous stochastic process and we focus on commonly used processes suggested by the financial literature such as the geometric brownian motion and the ornstein uhlenbeck process it is well known that under variable purchase price a price dependent base stock policy is optimal using the single unit decomposition approach we explicitly characterize the optimal base stock level using a series of threshold prices we show that the base stock level is first increasing and then decreasing in the current purchase price we provide a procedure for calculating the thresholds which yields closed form solutions when price follows a geometric brownian motion and implicit solutions under the ornstein uhlenbeck price model in addition our numerical study shows that the optimal policy performs much better than inventory policies that ignore future price evolution because it tends to place larger orders when prices are expected to increase

diversification under supply uncertainty supply chain management is becoming an increasingly important issue especially when in most industries the cost of materials purchased comprises 40 60 of the total sales revenue despite the benefits cited for single sourcing in the popular literature there is enough evidence of industries having two three sources for most parts in this paper we address the operational issue of quantity allocation between two uncertain suppliers and its effects on the inventory policies of the buyer based on the type of delivery contract a buyer has with the suppliers we suggest three models for the supply process model i is a one delivery contract with all of the order quantity delivered either in the current period with probability or in the next period with probability 1 model ii is also a one delivery contract with a random fraction of the order quantity delivered in the current period the portion of the order quantity not delivered is cancelled model iii is similar to model ii with the remaining quantity delivered in the next period we derive the optimal ordering policies that minimize the total ordering holding and penalty costs with backlogging we show that the optimal ordering policy in period n for each of these models is as follows for x a n order nothing for vi n x a n use only one supplier and for x vi n order from both suppliers for the limiting case in the single period version of model i we derive conditions under which one would continue ordering from one or the other or both suppliers for model ii we give sufficient conditions for not using the second more expensive supplier when the demand and yield distributions have some special form for the single period version of models ii and iii with equal marginal ordering costs we show that the optimal order quantities follow a ratio rule when demand is exponential and yields are either normal or gamma distributed

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

technology and hedging behavior a proof of hicks conjecture technical conditions give the entrepreneur a much freer hand about the acquisition of inputs which are largely needed to start a new process than about the completion of outputs whose process of production in the ordinary business sense may be already begun if forward markets consisted entirely of hedgers there would always be a tendency for a planned weakness on the demand side a smaller proportion of planned purchases than of planned sales would be covered by forward contracts 1946 p 137

note an acquisition policy for a single item multi supplier system in this paper we consider the problem of developing an acquisition policy specifically given a set of potential qualified suppliers from whom should the firm buy the product in what quantities and how often we provide properties of the optimal solution and relate them to the approach of using a single source as advocated by jit the solution procedure provides the periodic order quantity from each supplier the order size and the firm cycle time as well as how many times per cycle we should order from each supplier we show that the maximum error of our solution can be made as small as desired

capacitated procurement planning with price sensitive demand and general concave revenue functions this paper develops effective solution methods for discrete time finite horizon procurement planning problems with economies of scale in procurement price sensitive demand and time invariant procurement capacities our models consider general concave revenue functions in each time period and seek to maximize total revenue less procurement and inventory holding costs we consider the case in which prices may vary dynamically as well the important practical case in which a constant price is required during the planning horizon under mild conditions on the revenue function properties we provide polynomial time solution methods for this problem class the structural properties of optimal solutions that lead to efficient solution methods also serve to sharpen intuition regarding optimal demand management strategies in complex planning situations

transformation of optimization problems in revenue management queueing system and supply chain management abstract for revenue optimization problems in the literature on revenue management supply chain management and queueing systems some assumptions such as concavity of revenue functions or increasing generalized failure rate are often needed to ensure the problems to be analytically tractable we show that these assumptions are not necessary for this we present and study a parametric revenue maximization problem to unify some problems in the literature without the usual assumptions we transform the problem into an equivalent one where the revenue function is increasing continuous and concave we then apply the transformation method to a continuous time revenue management problem and conclude that the monotone results are robust to demand function and allowable price set also we apply the transformation method to study a parametric cost minimization problem we further apply our method to two optimal control problems in queueing systems and an inventory control problem in a supply chain with price only contract

the international financial market and us interest rates abstract this paper examines the linkages between the eurodollar and us domestic financial markets it is shown that using weekly data allows the isolation of significant fluctuations being transmitted between markets in both directions in particular financial markets in the us are affected significantly by foreign events it is impossible to reach precise conclusions about the causes of historical variation in the rates however this paper provides evidence that at most 40 of the variation in eurodollar interest rates over the 1975 1978 period can be traced to domestic us sources and that between about one fifth and two thirds of the variation in domestic rates can be traced to foreign sources

a geometric representation of profits in a supply chain network abstract economists express profits as areas representing producer s surplus or consumer s surplus corresponding to a pair of supply and demand functions a similar representation can be employed in a supply chain network where there can be several producers suppliers and several consumers retailers in various trading situations we aim to graphically represent the profits corresponding to a combination of the decisions of all participants in a supply chain simultaneously as areas of non overlapping regions on the same graph this way the shares of the participants in the total can be visually observed and the interdependencies and the inefficiencies in the chain can be detected where the decisions and the corresponding profits are generally interdependent such a visual tool can be used in evaluating as well as in designing a supply chain

optimal bank interest margin and default risk in equity returns under the return to domestic retail with structural breaks a retrenchment in crossborder credit is under way the product of both market forces and political pressure on international banks to lend at home economist 2009 in addition banks particularly the largest have also dramatically expanded their retail banking operations over the past few years hirtle and stiroh 2007 our goal in this article is to study the effects of default risk on equity returns through bank interest margin management under a renewed focus on domestic retail banking a trend often attributed to the stability of banking activities specifically this article explores the determinants of optimal bank interest margins based on an option based firm theoretical model with multiple sources of structural breaks due to political pressure the model demonstrates how capital regulation and political pressure on foreign lending return and risk conditions jointly determine the optimal bank interest margin decision we show that a more stringent capital requirement is linked with lower eq

clearance pricing and inventory policies for retail chains clearance pricing and end of season inventory management are challenging and important problems in retailing sales rates depend upon price seasonal effects and the remaining assortment of items available to customers there is little time to react to observed sales and pricing errors result in either loss of potential revenue or excess inventory to be liquidated this paper develops optimal clearance prices and inventory management policies that take into account the impact of reduced assortment and seasonal changes on sales rates versions of these policies have been tested and implemented at three major retail chains and these applications are summarized and discussed

joint dynamic pricing and lot sizing under competition abstract we study the joint dynamic pricing and lot sizing problem when firms operate in a competitive environment bearing in mind that a dynamic pricing strategy is successful when customers understand it we assume each firm selects prices from a discrete set the problem corresponds to a bertrand model so the pricing strategies of the firms should constitute a nash equilibrium given the combinatorial nature of the decisions computing the equilibrium in a tractable time may not be feasible for larger instances in order to compute the equilibrium efficiently we propose a framework consisting of solving iteratively mixed integer programming formulations the framework reduces the complexity of the problem by using the fact that pricing and inventory planning remain stable to marginal variations in competitors prices

export diversification and international debt under terms of trade uncertainty abstract this paper proposes an intertemporal approach to export diversification in developing countries facing uncertain terms of trade by incorporating international debt by far the predominant source of ldc external financing today the model provides a richer and more realistic framework than static models with no financial markets or models emphasizing international trade in equities the approach is applied to a small developing country with a comparative advantage in a risky commodity to illustrate explicitly the relation between intertemporal substitution in consumption and diversification in production

north south the implications for multinational banking abstract international finance should be of great value to developing countries because their potential growth paths are out of step with the world economy and because the gambles they must take to develop are much more diversifiable in the context of the world economy than locally however the actual benefits of north south finance have been limited by an overreliance on non specific bank credit with the inherent limitations and by errors in judgement by both borrowers and lenders in fact the current crisis threatens to reverse many of the earlier gains while the current crisis is primarily the result of the world recession the severity of its effects on lenders and borrowers reflects three key aspects of bank credits 1 its perverse real repayment patterns 2 its specific nature which implies that risks are transferred only through generalized non performance with its attendant deadweight costs and 3 its concentration in a small but critical segment of capital markets these characteristics would be serious even with ideal behavior by lenders and borrowers but they also can lend to inappropriate and possibly erratic behavior specific suggestion for restructuring the system of north south finance are given including 1 smoothing repayment patterns 2 increasing repayment flexibility 3 increasing risk bearing non specific finance 4 increasing non recourse financing and 5 increasing project specific risk capital

quantity premiums and discounts in dynamic pricing we consider a dynamic pricing problem for a monopolistic company selling a perishable product when customer demand is both uncertain and occurs in batches that must be fulfilled as a whole the seller can price discriminate between different sized batches by setting different unit prices the problem is modeled as a stochastic optimal control problem to find an inventory contingent dynamic pricing policy that maximizes the expected total revenues we find the optimal pricing policy and prove several monotonicity results first we establish stochastic order conditions on the unit willingness to pay distributions that determine when quantity discounts or premiums take place for a batch purchase compared to a rapid sequence of purchases with the same total size second we give sufficient conditions for prices to be monotonically decreasing or increasing in inventory third we characterize the conditions for the perceived quantity discounts and premiums that result from comparing unit prices for different batch sizes under a particular inventory level

international lending patterns of u s commercial banks the international lending behavior of the u s commercial banks depends upon economic links between countries much of the difference between the international loan portfolios of u s banks and those of the non u s banks may be explained by the patterns of trade flows and investments by nonfinancial corporations these trade flows and investment patterns explain most of the variations in the bank lending patterns for 70 80 percent of the countries the analysis points to an increasing influence of economic ties on the lending process over time

optimal starting times for end of season sales and optimal stopping times for promotional fares many industries face the problem of selling a fixed stock of items over a finite horizon these industries include airlines selling seats before planes depart hotels renting rooms before midnight theaters selling seats before curtain time and retailers selling seasonal goods such as air conditioners or winter coats before the end of the season given a fixed number of seats rooms or coats the objective for these industries is to maximize revenues in excess of salvage value when demand is price sensitive and stochastic pricing is an effective tool to maximize revenues in this paper we address the problem of deciding the optimal timing of a single price change from a given initial price to either a given lower or higher second price under mild conditions we show that it is optimal to decrease resp to increase the initial price as soon as the time to go falls below resp above a time threshold that depends on the number of yet unsold items

financial contracts and international lending abstract this paper examines alternative financial contracts for international lending i demonstrate that conventional loans can be pareto dominated by financial contracts explicitly incorporating characteristics of the borrower s product market i provide conditions under which commodity linked debt is desirable and determine when more complicated revenue linked loans are optimal i also demonstrate that the type of lending contract has important real effects on production decisions one result of this research is to demonstrate why equity based lending arrangements may have limited applicability

the total cost of logistics in supplier selection under conditions of multiple sourcing multiple criteria and capacity constraint abstract little attention is given in the literature to decisions on the appropriate selection of suppliers and on assigning order quantities to these suppliers in the case of multiple sourcing with multiple criteria and with suppliers capacity constraints only a few mathematical programming models to analyse such decisions have been published to date and these have tended to consider only net price as the cost of purchasing although the costs of transportation ordering and storage may be significantly important to the decision in this paper a mixed integer non linear programming model is presented to solve the multiple sourcing problem which takes into account the total cost of logistics including net price storage transportation and ordering costs buyer limitations on budget quality service etc can also be considered in the model an algorithm is proposed to solve the model and the model is illustrated using a numerical example

an analysis of bid price controls for network revenue management bid prices are becoming an increasingly popular method for controlling the sale of inventoryin revenue management applications in this form of control threshold or bid prices are set for the resources or units of inventory seats on flight legs hotel rooms on specific dates etc and a product a seat in a fare class on an itinerary or room for a sequence of dates is sold only if the offered fare exceeds the sum of the threshold prices of all the resources needed to supply the product this approach is appealing on intuitive and practical grounds but the theory underlying it is not well developed moreover the extent to which bid price controls represent optimal or near optimal policies is not well understood using a general model of the demand process we show that bid price control is not optimal in general and analyze why bid price schemes can fail to produce correct accept deny decisions however we prove that when leg capacities and sales volumes are large bid price controls are asymptotically optimal provided the right bid prices are used we also provide analytical upper bounds on the optimal revenue in addition we analyze properties of the asymptotically optimal bid prices for example we show they are constant over time even when demand is nonstationary and that they may not be unique

export specialisation and local economic growth this paper aims to provide empirical evidence on whether export specialization or diversification is better for local economic growth using export data from 354 magisterial districts of south africa for 1996 and 2001 we estimate spatial growth regressions that include measures of the degree of export specialization and diversification overall exporting regions outperform other less or non exporting regions also we find that export specialisation rather than export diversification has been associated with local economic growth with specialization in mining and agriculture being especially beneficial our results support the view that specialization in a locality s area of comparative advantage is good for local economic development we also find that localities with higher initial levels of human capital and higher subsequent population growth performed better this is consistent with the belief that policies aimed at strengthening human capital and improving agglomeration economies will enhance local economic development

joint production and pricing decisions with setup costs and capacity constraints we consider the problem of setting prices and choosing production quantities for a single product over a finite horizon for a capacity constrained manufacturer facing price sensitive demands there is a fixed cost per production run and a variable cost per unit produced both of which may vary by period we characterize properties of the optimal solution considering cases with constant and time varying capacity and with and without speculative motive for holding inventory we show that counter to intuition optimal prices may increase as the capacity increases even when capacity is constant over the horizon we also show that increases in capacity do not always exhibit diminishing marginal returns our procedure produces solutions with much higher profits than can be obtained from a sophisticated sequential procedure in which a well informed and optimum seeking marketing department makes pricing decisions and the manufacturing department seeks to satisfy the resulting demands at minimum cost our results also suggest that firms with seasonal demand and tight capacity constraints should be more aggressive in setting prices to manage their demands than what is typically done in practice finally we discuss how a decision maker can use our procedure as an aid in solving multiproduct versions of the problem

mathematical programming for network revenue management revisited mathematical programming models for airline seat inventory control provide booking limits and bid prices for all itineraries and fare classes e l williamson airline network seat inventory control methodologies and revenue impacts ph d thesis massachusetts institute of technology cambridge ma 1992 finds that simple deterministic approximation methods based on average demand often outperform more advanced probabilistic heuristics we argue that this phenomenon is due to a booking process that includes nesting of the fare classes which is ignored in the modeling phase the differences in the performance between these approximations are studied using a stochastic programming model that includes the deterministic model as a special case our study carefully examines the trade off between computation time and the aggregation level of demand uncertainty with examples of a multi leg flight and a single hub network

doing the right thing or doing the thing right allocating resources between marketing research and manufacturing matching production with sales potential is essential for survival in volatile markets manufacturing and marketing managers compete for staff space cash and other assets as they struggle both to determine what and how many products ought to be produced and to actually produce them we develop an analytical framework to answer one simple question how much marketing research should a firm do when it takes resources away from manufacturing the goods that generate revenue to understand the costs and benefits of marketing research we account for the lost opportunities to produce these goods some analytical findings are striking firms without initial knowledge of their potential customers should allocate one third of the firm s resources to marketing research the model suggests a host of issues to be more deeply studied by management scientists

dynamic pricing of multiple home delivery options abstract online grocers accept delivery bookings and have to deliver groceries to consumers residences grocery stores operate on very thin margins therefore a critical question that an online grocery store needs to address is the cost of home delivery operations in this paper we develop a markov decision process based pricing model that recognizes the need to balance utilization of delivery capacity by the grocer and the need to have the goods delivered at the most convenient time for the customer the model dynamically adjusts delivery prices as customers arrive and make choices the optimal prices have the following properties first the optimal prices are such that the online grocer gains the same expected payoff in the remaining booking horizon regardless of the delivery option independently chosen by a consumer second with unit order sizes delivery prices can increase due to dynamic substitution effects as there is less time left in the booking horizon

competitive strategies for two firms with asymmetric production cost structures we model joint production marketing strategies for two firms with asymmetric production cost structures in competition the first firm called the production smoother faces a convex production cost and a linear inventory holding cost the second firm called the order taker faces a linear production cost and holds no inventory each firm is assumed to vary continuously over time both its production rate and its price in view of an unstable surge pattern of demand the underlying theoretical motivation is to investigate the temporal nature of the equilibrium policies of two competing firms one operating at or near capacity the production smoother and one operating significantly below capacity the order taker we characterize and compare the equilibrium strategies of the two competing firms among our results we show that if the duopolistic production smoother finds it optimal to hold inventory then he will begin the season by building up inventory continue by drawing down inventory until i

systematic peak load pricing congestion premia and demand diverting empirical evidence abstract this paper finds empirical support to systematic peak load pricing in airlines higher fares in ex ante known congested periods it estimates a congestion premia and supports the main empirical prediction in gale and holmes gale i holmes t 1993 advance purchase discounts and monopoly allocation of capacity american economic review 83 135 146 less discount seats on peak flights

returns to acquirers of privatizing financial services firms an international examination abstract while the literature reports improved performance for privatizing firms banking markets are different many privatizing financial services firms face unique problems such as an overhang of problem loans and weak credit cultures and legal systems we investigate the returns to successful bidders in privatization acquisitions of financial services firms examine short horizon performance and test whether such acquisitions result in a change in risk for the bidding firm our results show that the cumulative abnormal returns to shareholders of bidding firms are positive perhaps reflecting initial optimism that the foreign firm acquiring the privatizing firm would share in the success associated with privatization bidders also experience an increase in their total risk following the acquisition

external market conditions competitiveness diversification and ldcs exports ldcs trade policies in the post war period have been influenced greatly by trade pessimism theory increasingly however the assumptions underlying the pessimists analysis and the wisdom of their policy prescriptions have been challenged this paper attempts to construct a model which may be used to investigate the determinants of export performance for individual developing countries and the determinants of relative performance across the sample of twenty seven countries the results obtained both for individual countries and across the sample tend to support the emphasis placed by the opponents of trade pessimism on the importance of supply side factors

optimal pricing strategies for new products in dynamic oligopolies this paper deals with the determination of optimal pricing policies for firms in oligopolistic markets the problem is studied as a differential game and optimal pricing policies are established as nash open loop controls cost learning effects are assumed such that unit costs are decreasing with cumulative output discounting of future profits is also taken into consideration initially the problem is addressed in a general framework and we proceed to study some specific cases that are related to models presented in recent literature three basic classes of sales dynamics are analyzed competition with price effects only competition with price as well as adoption effects and competition with adoption effects only in some cases it turns out that results which hold for the monopoly case carry over to the multi firm case in the sense that the qualitative structure of optimal pricing strategies is the same in the monopoly and the oligopoly cases however due to competitive interdependencies differences certainly exist in the levels as well as the rates of change of optimal prices

consumption liquidity constraints and asset accumulation in the presence of random income fluctuations recent empirical research flavin 1981 hagashi 1982 has rejected the certainty equivalent formulation of permanent income hypothesis hall 1978 these findings are often attributed to households inability to borrow completely against expected future labor income this paper is a theoretical investigation of optimal consumption behavior under risk aversion random income fluctuations and borrowing restrictions our principle objective is to establish the existence and to investigate the properties of the stationary probability distribution which characterizes the asymptotic behavior of consumption under these conditions this abstract was borrowed from another version of this item

why are products sold on sale explanations of pricing regularities this paper reports on interesting changes in markdown pricing practices over time and differences in the pricing within a product line the price discrimination and the uncertainty hypotheses appear to better explain the data than the peak load hypothesis fashion has become more important over time and appears to explain the greater seasonal variation in retail apparel prices in recent years differences in uncertainty also explains differences in the pricing of different types of men s dress shirts

commodity bonds and consumption risks this paper analyzes the economic role of commodity bonds by examining the nature of the demand for these securities i show that while commodity bonds protect against relative price changes they do so by introducing variability into the future real income stream this variability limits the desirability of using commodity bonds to provide price insurance for future consumption however this variability may allow commodity bonds to hedge risks to consumption caused by stochastic changes in income the analysis also suggests that it is this income insurance rather than price insurance that is important in hedging risks to future consumption in 1863 the confederate states of america csa took the unusual step of issuing bonds payable in bales of cotton in 1980 the sunshine mining company took the unusual step of issuing bonds payable in ounces of silver although the csa commodity bond offering proved to be of an isolated and rather shortlived nature recent developments suggest that commodity bond offerings like that of sunshine mining may become more commonplace for example both mexico and the british oil and gas corporation have issued petroleum bonds and the reagan administration has proposed issuing oil indexed bonds to finance the strategic oil reserve france has experimented with gold bonds as have several private companies commodity indexed debt also has appeared outside of organized bond markets shared appreciation mortgages for example represent a debt indexed to the price of housing even bank loans can be indexed to underlying commodities as evidenced by the oil indexed loans between japanese banks and the soviet union 2 such developments suggest that debts linked to a wide variety of commodity indices are certainly feasible this paper analyzes the economic role of commodity bonds by considering the nature of the demand for these securities because commodity bonds can hedge graduate school of management cornell university this paper has benefitted greatly from discussions with david easley seymour smidt and piet sercu i would also like to acknowledge the extremely valuable comments of an anomymous referee 1 for discussion of the reagan petroleum bond plan see a new plan to finance oil reserve new york times january 15 1981 devious device to trim a budget new york times february 6 1981 and building an oil reserve the thrifty way new york times february 16 1981 britain s oil bonds are discussed in oil bonds may not bring riches world business weekly october 27 1980 gold bonds are featured in gold indexed bond is costly for france new york times june 30 1980 hot seller bonds indexed to oil and gold business week august 3 1979 and sale of gold bonds in europe planned new york times january 28 1981 2 numerous articles on such indexed loans have appeared in the wall street journal see for example wsj february 15 1979 p 33 june 11 1979 p 18 august 15 1979 p 29 april 7 1980 p 7 april 8 1980 p 35 and may 14 1981 p 31

dynamic advertising and pricing with constant demand elasticities in this paper we analyze a stochastic dynamic advertising and pricing model with isoelastic demand the state space is discrete time is continuous and the planing horizon is allowed to be finite or infinite a dynamic version of the dorfman steiner identity will be derived explicit expressions of the optimal advertising and pricing policies of the value function and of the optimal advertising expenditures will be given the general results will be used to analyze the case of impatient customers furthermore particular time inhomogeneous models and homogeneous ones with and without discounting will be examined we will study the social efficiency of a monopolist s optimal policies and the consequences of specific subsidies from a buyer s perspective our analysis reveals that waiting when looking at immediate expected prices is never profitable should two or more units be available but we will also prove that the sequence of average sales prices is monotone decreasing moreover the techniques applied to solve the discrete stochastic advertising and pricing problem will be used to solve a related deterministic control problem with continuous state space

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

nonparametric advertising budget allocation with inventory constraint abstract in this paper we study the optimization problem of the advertising budget allocation for revenue management faced by a marketer besides the advertising budget the marketer is subject to an inventory constraint during the promotion season the marketer can affect sales by spending on advertising but does not initially know the relationship between the advertising expense and consequent sales we propose a nonparametric learning while doing budget allocation policy for the problem specifically we first conduct a sequence of advertising experiments to learn predict the market sales response through observing realized sales exploration then based on the learned sales function determine the following budget allocation planning exploitation in particular during the exploration and exploitation phases we need to balance the advertising and inventory budgets simultaneously we show that our policy is asymptotically optimal as the size of the market increases by constructing a worst case example we show that our policy achieves near best asymptotic performance we also provide numerical illustrations to show how our policy works and discuss how its performance changes as the system parameters vary we also glen some managerial implications of our model and policy from the numerical results

reinforcement learning for joint pricing lead time and scheduling decisions in make to order systems the paper investigates a problem faced by a make to order mto firm that has the ability to reject or accept orders and set prices and lead times to influence demands inventory holding costs for early completed orders tardiness costs for late delivery orders order rejection costs manufacturing variable costs and fixed costs are considered in order to maximize the expected profits in an infinite planning horizon with stochastic demands the firm needs to make decisions from the following aspects which orders to accept or reject the trade off between price and lead time and the potential for increased demand against capacity constraints we model the problem as a semi markov decision problem smdp and develop a reinforcement learning rl based q learning algorithm qla for the problem in addition we build a discrete event simulation model to validate the performance of the qla and compare the experimental results with two benchmark policies the first come first serve fcfs policy and a threshold heuristic policy it is shown that the qla outperforms the existing policies

a taxonomy and research overview of perishable asset revenue management yield management overbooking and pricing this paper proposes the term perishable asset revenue management to denote the field that combines the areas of yield management overbooking and pricing for perishable assets after summarizing the characteristics common to problems in this field the paper discusses the objectives and constraints faced by decision makers then it offers a comprehensive taxonomy with 14 different elements and reviews the research that has been done related to each element finally it suggests some important areas of future research that can help bridge the gap between theory and application

note the role of returns policies in pricing and inventory decisions for catalogue goods manufacturers often use returns policies to encourage retailers to stock and price items more aggressively we focus on the effect that such policies have on both a retailer s and a manufacturer s profits when the retailer must commit prior to the selling season to both a stocking quantity and a price at which to sell an item such a commitment is often necessary for retailers who sell primarily through catalogues

institutional uncertainty and the maturity of international loans abstract this paper shows that non economic uncertainty in foreign countries contributes to a bias toward short term maturity in international lending frequent government changes and weak institutions explain why some countries find it difficult to obtain long term financing debt maturity is also explained by the level of economic and financial development of a country the composition of loan portfolios in terms of the type of borrowers and debt restructuring programs among other variables the results are obtained using data on international lending by three groups of u s banks large medium sized and small small banks shorten the maturity of their international loans in response to uncertainty to a greater extent compared to large banks

investment in developed and less developed countries a number of studies have compared the investment risk of various industries and of various individual corporations in developed countries dcs the purpose of this paper is to compare investment risk in dcs with less developed countries ldcs the variance of returns to investment in common stocks provides a natural measure of investment risk and will be used in this study studies in ldcs include work of levy and sarnat 12 13 errunza 3 4 and lessard 11 levy and sarnat and errunza found low economy wide investment risk on an average for ldcs relative to dcs with stock indices being used as surrogates for economy wide risk these results are not unambiguous however because there are probable difficulties due to infrequent trading and averaging in the broad market indices used in the above studies hence we use a sample of the largest corporations that suffer little if at all from thin trading and or averaging

loan pushing and triadic relations this paper is an attempt to define and explore the phenomenon of loan pushing in international lending in the 1970s the earliest descriptions of loan pushing are anecdotal this paper surveys the various facets that emerge from these anecdotes and suggests a possible definition that serves as the basis for a theoretical model this model inspired by the confessions of a banker explores a triadic relationship between a corporation in the lender country the lender bank and a borrower in a developing country and suggests that a rational profit maximizing commercial bank could end up pushing loans on to the borrower changes in international commercial banking in the 1970s that facilitated this type of loan pushing are discussed next to the extent that the loan pushing doctrine is valid it implies that the commercial banks were at least as responsible for the massive lending boom of the 1970s as the borrowers and should have been made to bear the cost of adjustment as well the process of sovereign lending in the 1970s appears to consist of voluntary and mutually agreeable contracts between the transnational commercial banks and credit seeking developing countries the suggestion that there could be in this process an element of aggressiveness on the part of the commercial banks that actively and systematically pushed loans on to developing country borrowers may at first sight seem inconceivable if a borrower voluntarily enters into a loan contract he is obviously doing so because the contract is beneficial if such is the case then would it be correct to characterize the process as one of loan pushing also the commercial banks are supposed to be rational profit maximizers thus the amount of lending cannot be more than optimal what then is meant by loan pushing these are a few questions that immediately come to mind it has been argued that international credit can contribute to increasing donor exports see for instance winkler 1929 hyson and strout 1968 gwynne 1983 taylor 1985 darity and horn 1988 basu 1991 basu and deshpande 1995 this is indeed one of the arguments used to explain the phenomenon of loan pushing however not the only one the aim of this paper is to explore the idea of loan pushing a little more deeply by first trying to understand the concept along with a brief review of the literature in the area section 2 the confessions of a young banker gwynne 1983 provide the basis of the theoretical model section 3 which considers a triadic relationship between a commercial bank in a creditor country a debtor nation and a corporation in the creditor country and the compulsions of loan pushing arising

wealth effects of foreign expansion by u s banks abstract the effects of foreign expansion on the market values of u s banks usbs are examined in this study the results show that shareholders of usbs experience significant abnormal returns of 0 17 percent when banks announce foreign expansions abnormal returns are insignificant when the announced mode of expansion is through a representative office are significantly positive for announcements related to branches and are significantly negative when the announced mode of expansion is through formation of a joint venture or a subsidiary or through an acquisition abnormal returns are significantly negative when banks announce expansion into developed countries and are significantly positive when announcements relate to risky developing countries post announcement changes in the total variance of returns and in the unsystematic risk of usbs are inversely related with abnormal returns higher wealth effects are associated with higher levels of prior overseas experience

optimal inventory policy for a perishable item with demand function sensitive to price and time abstract we formulate a model for determining the optimal pricing order quantity and replenishment period for perishable items with price dependent and time dependent demand the items have a fixed shelf life and the demand rate decreases linearly in the selling price and polynomially over the time after replenishment until it vanishes either at the reservation price or at expiration time we prove that the three variable profit maximization problem can be reduced into a single variable problem in which the variable is the duration of the replenishment period we show that the profit function is strictly pseudo concave and provide means of obtaining the optimal policy three numerical examples are presented to demonstrate the model accompanied by a sensitivity analysis

dynamic version of the economic lot size model this article originally appeared in management science october 1958 volume 5 number 1 pp 89 96 published by the institute of management sciences a forward algorithm for a solution to the following dynamic version of the economic lot size model is given allowing the possibility of demands for a single item inventory holding charges and setup costs to vary over n periods we desire a minimum total cost inventory management scheme which satisfies known demand in every period disjoint planning horizons are shown to be possible which eliminate the necessity of having data for the full n periods

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

bank systemic risk and macroeconomic shocks canadian and u s evidence abstract this paper investigates how banks as a group react to macroeconomic risk and uncertainty more specifically it examines the relationship between bank systemic risk and changes and disruptions in economic conditions adopting the methodology of beaudry et al 2001 we introduce a new estimation procedure based on egarch to refine the framework developed by baum et al 2002 baum et al 2004 baum et al 2009 and quagliariello 2007 quagliariello 2009 and we analyze the relationship in the current industry context i e in the context of market based banking our results confirm that banks tend to behave more homogeneously vis a vis macroeconomic uncertainty in particular we find that both the cross sectional dispersion of loans to assets and the cross sectional dispersion of non interest income share shrink during slow growth episodes and particularly during financial crises when the resilience of the banking system is at its lowest more importantly our main findings indicate that the cross sectional dispersion of loans to assets has increased in the last decade whereas the cross sectional dispersion of non interest income share appears to be more volatile and sensitive to macroeconomic shocks

dynamic pricing with loss averse consumers and peak end anchoring we study the dynamic pricing implications of a new behaviorally motivated reference price mechanism based on the peak end memory mode this model suggests that consumers anchor on a reference price that is a weighted average of the lowest and most recent prices loss averse consumers are more sensitive to perceived losses than gains relative to this reference price we find that a range of constant pricing policies is optimal for the corresponding dynamic pricing problem this range is wider the more consumers anchor on lowest prices and it persists when buyers are loss neutral in contrast with previous literature in a transient regime the optimal pricing policy is monotone and converges to a steady state price which is lower the more extreme and salient the low price anchor is our results suggest that behavioral regularities such as peak end anchoring and loss aversion limit the benefits of varying prices and caution that the adverse effects of deep discounts on the firm s optimal prices and profits might be more enduring than previous models predict

tariffs as insurance optimal commercial policy when domestic markets are incomplete free trade is not optimal for a small country that faces uncertain terms of trade if some factors are immobile ex post and markets for contingent claims are incomplete the government can improve social welfare by using commercial policy that serves as a partial substitute for missing insurance markets using a combination of analytical and simulation techniques we demonstrate that optimal policy for this purpose will often have an anti trade bias we also show that the usual preference by economists for factor or product taxes and subsidies over tariffs and export subsidies may not be justified in this context this abstract was borrowed from another version of this item