a comparative analysis of approaches for determining optimal price and order quantity when a sale increases demand abstract both average cost or profit and present value of cost or profit methods have been used in developing inventory policies although the present value method represents the costs and revenues better both methods generate identical solutions for the classical eoq case this paper discusses the differences between the two methods and illustrates situations where these two methods generate drastically different policies specifically when a supplier reduces the price of a product temporarily a retailer might place a special order and offer a discount on these units to its customers to increase demand this paper uses an average profit method to develop profit functions for different combinations of supplier s sale period and retailer s replenishment time and presents methods for determining the optimal price and order quantity experiments are then conducted to compare the results of average profit and present value of profit approaches for solving the problem the results indicate that these models may generate drastically different policies for the problem and neither model will consistently generate a larger order quantity this paper suggests that the present value approach be used to determine optimal policies when there is a temporary change in price and demand

do too many cooks always spoil the stew an experimental analysis of rent seeking and the role of a strategic buyer laboratory methods are used to evaluate the effects of institutional arrangements and rent defending activity on rent seeking auction outcomes in part nash equilibrium predictions are a useful behavioral guide as predicted more rents are dissipated in perfectly discriminating auctions where the high bidder wins than in lotteries where relative bids determine the chance of winning also as predicted the introduction of a rent defending buyer reduces social costs nevertheless the social costs of rent seeking consistently exceed predicted levels moreover individual bidding especially by buyers deviates markedly from nash predictions

toilet cleaning and department chairing volunteering a public service abstract who will do a job that nobody wants but that someone has to do the search for a volunteer is modelled as a war of attrition in which everyone is tempted to just wait for someone else to do it we show that the volunteer will be ceteris paribus the individual for whom the benefit cost ratio of performing the public service is largest the one most impatient to consume it or the one who stands to benefit from it the longest

rent seeking with bounded rationality an analysis of the all pay auction the winner take all nature of all pay auctions makes the outcome sensitive to decision errors which we introduce with a logit formulation the equilibrium bid distribution is a fixed point the belief distributions that determine expected payoffs equal the choice distributions determined by expected payoffs we prove existence uniqueness and symmetry properties in contrast to the nash equilibrium the comparative statics of the logit equilibrium are intuitive rent dissipation increases with the number of players and the bid cost overdissipation of rents is impossible under full rationality but is observed in laboratory experiments our model predicts this property

comments on a comparative analysis for determining optimal price and order quantity when a sale increases demand although the net present value npv criterion is theoretically the correct approach to developing optimal inventory policies in the classical eoq case the average profit criterion generates solutions that are practically identical to those resulting from the npv criterion nevertheless a recent paper suggests that when the demand for a product is price elastic and a wholesaler offers a one time only price discount use of the average profit criterion may obtain policies that are drastically suboptimal compared to the policies obtained by using the npv criterion we show that this suggestion is based on inaccurate models and inconsistent comparisons although in cases of large one time only discounts there may be significant differences in the policies and consequences resulting from the two criteria such large discounts are unrealistic furthermore the larger the discount the less practicable are the optimal order quantities based on either one of these criteria thus in most real life situations the use of the average profit criterion does not result in serious suboptimization in these situations what may be important is not whether a retailer uses the npv criterion or the average profit criterion but whether the retailer can and does implement the optimal decisions resulting from the use of either criterion

rationalizable predatory pricing abstract this paper shows that predatory pricing is rationalizable and is in this sense rational even when there is no uncertainty regarding structural parameters such as cost or demand predatory pricing is modelled as a war of attrition all strategy profiles including all possible lengths of predatory battles are rationalizable in the extensive form despite this weak restrictions on beliefs combined with rationalizability have drastic implications for the play of the game journal of economic literatureclassification numbers c72 c73 l12 l41

5 information impact and allocation rules in auctions with affiliated private values a laboratory study in affiliated private value auctions each bidder has perfect information regarding his her own value for the object at auction but higher values of the item for one bidder make higher values for other bidders more likely we report on a series of experiments examining three key implications of these auctions i in a first price auction public information about rivals values increases expected revenue ii an english auction increases expected revenue compared to a first price auction and iii a second price auction is isomorphic to an english auction in examining these issues we compare predictions of some ad hoc bidding models with nash equilibrium predictions in the first price auction experiments nash equilibrium bidding theory organizes the data better than either of two ad hoc bidding models public information about others valuations does increase average revenue but the increase in revenue is smaller and less reliable than predicted under risk neutral nash equilibrium bidding lower average revenue might be attributed to risk aversion while the high variability is attributed to a sizable frequency of individual bidding errors relative to the theory bidding theory precisely organizes english auction outcomes after a brief initial learning period the dominant strategy equilibrium does not organize second price auctions nearly as well as market prices persistently exceed predicted prices the difference between english and second price outcomes is attributed to effects of different information flows inherent in the structure of the two institutions on eliminating bidding errors revenue impacts of these two institutions relative to a first price auction are examined in light of observed bidding patterns

optimal ordering strategies for announced price increases the familiar model for determining the optimal ordering strategy given an announced price increase assumes that the buyer has an opportunity to place an order at the end of the next economic order quantity cycle before the price increase takes effect this paper extends the price increase model by relaxing the requirement on the timing of the price increase specifically we develop optimal ordering strategies for situations where the price increase becomes effective at any future specified time we also calculate savings for alternate ordering strategies

a theory of exit in duopoly we develop a duopoly model in which exit occurs because of the existence of fixed costs or opportunity costs each firm enters the market knowing its own cost but not that of its opponent as times goes on each firm becomes increasingly pessimistic about the cost of its remaining rival the time of exit is the only strategic variable so that our model is a war of attrition in contrast to the classic war of attrition however we assume that with positive probability each firm s costs may be low enough that staying in forever is a dominant strategy thus our model unlike the classic one has a unique equilibrium

a joint optimal pricing rebate value and lot sizing model delayed incentives in the form of mail in cash rebates are very popular among manufacturers and more recently among retailers one of the main advantages of rebates is that while they increase demand a small proportion of consumers redeem them in this paper we formulate and solve models for jointly determining the optimal price rebate face value and the optimal order quantity for a price and rebate sensitive deterministic demand the models show that under realistic conditions offering rebates can have significant pricing and inventory policy implications and can lead to a significant increase in profit

less fighting than expected experiments with wars of attrition and all pay auctions while all pay auctions are well researched experimentally we do not have much laboratory evidence on wars of attrition this paper tries to fill this gap technically there are only a few differences between wars of attrition and all pay auctions behaviorally however we find striking differences as many studies our experiment finds overbidding in all pay auctions in contrast in wars of attrition we observe systematic underbidding

coordinating ordering and pricing decisions in a two stage distribution system with price sensitive demand through short term discounting abstract we consider a short term discounting model in which the distributor offers a discounted price for the retailers orders placed at the beginning of its replenishment cycle in a non cooperative distribution system with one distributor and multiple retailers each facing price sensitive demand we examine the value of the price discount strategy as a mechanism for the distributor to coordinate the retailers ordering and pricing decisions under two common types of demand linear demand in price and constant elasticity demand in price our numerical study reveals that in the presence of homogeneous retailers namely retailers with identical demand rates the distributor s profit improvement due to coordination generally decreases as the number of retailers or the inventory holding cost rate increases but increases as price elasticity increases although an increase in the inventory holding cost rate has a negative effect on the distributor s profit it may have a positive effect on the retailers profits we further find that with heterogeneous retailers namely retailers with different demand rates offering a discounted price under linear demand benefits the distributor when both the inventory holding cost rate and the variation in demand are either small or large this cross effect however is absent under constant elasticity demand

volunteering a public service an experimental investigation in some public goods environments it may be advantageous for heterogeneous groups to be coordinated by a single individual this volunteer will bear private costs for acting as the leader while enabling each member of the group to achieve maximum potential gains this environment is modeled as a war of attrition game in which everyone can wait for someone else to volunteer since these games generally have multiple nash equilibria but a unique subgameperfect equilibrium we tested experimentally the predictive power of the subgame perfection criterion our data contradict that subjects saw the subgame perfect strategy combination as the obvious way to play the game an alternative behavioral hypothesis that subjects were unable to predict accurately how their opponents would play and tried to maximize their expected payoff is proposed this hypothesis fits the observed data generally well

reexamining efficient rent seeking in laboratory markets given millner and pratt s 1989 finding of behavior inconsistent with theory we reexamine efficient rent seeking in experimental markets we show that a when r 3 no nash equilibrium exists and therefore behavior has no theoretical benchmark to judge consistency and b when r 1 with a new experimental design utilizing an explicit expected payoff matrix rent seeking behavior is consistent with both nash equilibrium and dissipation hypotheses

the timing and incidence of exploratory drilling on offshore wildcat tracts this paper is an empirical study of learning and strategic delay in exploratory drilling the specific context is drilling on federal land off the coast of texas and louisiana between 1954 and 1990 the us federal government held a number of sales in which it sold the oil and gas rights to thousands of parcels of its offshore land these parcels known as tracts each cover an area of five thousand acres on average the typical sale involves more than a hundred tracts most sales are wildcat sales which consist of tracts located in areas where there has not been prior exploratory drilling and on site drilling is not permitted prior to the sale firms have access only to seismic information and as a consequence face considerable uncertainty the rights to the tracts are sold individually using a first price sealed bid auction and ownership of tracts in an area is typically distributed among several firms tracts within an area often share common geological features and a subset may be located over a common pool in either case the ex post value of nearby leases will be correlated and as result there is an information externality associated with exploratory drilling 20 refs 1more fig 5 tabs less

strategic bargaining models and interpretation of strike data attrition screening and signalling models of strategic bargaining are characterized in terms of their predictions about the incidence mean duration and settlement rates of strikes and the terms of wage settlements these predictions are compared with the general features observed in empirical studies of strikes in canada and the united states conclusions are drawn about the types of models capable of generating these features and about the conformity of the models to the evidence methods are described for computing the numerical examples used to illustrate the models

an experimental investigation of efficient rent seeking the debate about the measurement of the amount of rent dissipated in rent seeking activities is unable to be answered by observations from the naturally occurring environment current theoretical investigations have indicated that a number of factors will affect the amount of rent that can be assumed to be dissipated by rent seeking the theory of efficient rent seeking predicts that the number of rent seekers their risk posture their ability to enter and exit the rent seeking process and the manner in which the probability of receiving a rent is determined will affect the amount of rent that is dissipated

efficient rent seeking in experiment in a series of experiments we show that people learn to playthe efficient outcome in an open ended rent seeking game thisresult persists despite quite different experimentenvironments and designs like different propensities ofcompetition group sizes etc and is interpretable as aresolution of the so called tullock paradox which states thatreal world rent seeking expenditures are much lower than whatthe standard rent seeking model predicts

mandated volunteering an experimental approach this study employs a novel experimental paradigm to examine crowdout effects in volunteering using a framework modelled upon money donation experiments we examine the impact of forced volunteer

an analysis of the war of attrition and the all pay auction we study the war of attrition and the all pay auction when players signals are affiliated and symmetrically distributed we a find sufficient conditions for the existence of symmetric monotonic equilibrium bidding strategies and b examine the performance of these auction forms in terms of the expected revenue accruing to the seller under our conditions the war of attrition raises greater expected revenue than all other known sealed bid auction forms journal of economic literature classification numbers d44 d82 1997 academic press

optimal prices and order quantities when temporary price discounts result in increase in demand abstract suppliers often offer temporary price discounts to retailers the discount motivates retailers to increase their order quantity and offer a discount to their customers to increase demand and profit in this paper the change in price and the resulting change in demand and their effect on inventory policy and total profit is analyzed simultaneously to determine retailer s optimal price and optimal ordering policies the simultaneous analysis considers the joint effect of marketing and inventory policies on profits and prohibits the suboptimality that is inherent in the customarily serial treatment of these policies this paper uses a general price demand relationship and develops general models for determining optimal price and order quantity any specific price demand relationship may be substituted in these models to determine the optimal price and optimal order quantity for specific cases