We combine two unique data sets to document and explain a time varying price rigidity. The first data set consists of the time series of actual retail and wholesale transaction prices, and a measure of upstream commodity cost for 12 products in refrigerated and frozen orange juice categories collected weekly over a three-year period, 1989–1992, at a large midwestern supermarket chain. A special...

Market characteristics, including intrinsic demand and customer sensitivity on price and product performance level, are distinct at different markets. Comparisons of various product development strategies in one market or two geographically separated markets are conducted for three classes of products: development intensive products (DIPs) with constant unit cost, marginal cost-intensive produc...

We consider a Hotelling game where a finite number of retailers choose a location, given that their potential consumers are distributed on a network. Retailers do not compete on price but only on location, therefore each consumer shops at the closest store. We show that when the number of retailers is large enough, the game admits a pure Nash equilibrium and we construct it. We then compare the...

The regulator of a natural monopoly that sets a two-part tariff and whose marginal cost is stochastic will generally want the price to vary less than marginal cost when the lump-sum charge in the tariff is fixed. A trade-off exists between efficient pricing and an optimal allocation of risk. Pricing at marginal cost is only optimal when the consumer’s marginal utility is independent of the pric...

The retail price a household pays for the last unit of grid-supplied electricity consumed is an important driver of the decision to install a rooftop solar photovoltaic (PV) system. This price is the cost a household avoids by consuming a kilowatt-hour (KWh) from their rooftop solar system. Consequently, if the levelized cost of a KWh from a rooftop solar system is less than this retail price, ...

This chapter provides conservative estimates of the effectiveness and cost-effectiveness of tobacco-control policies. Using a model of the cohort of smokers alive in 1995, we find that tax increases that would raise the real price of cigarettes by 10% worldwide would cause about 42 million of these smokers to quit. This price increase would prevent a minimum of 10 million tobacco-related deaths...

We study competitive bidding with an explicit bid floor, motivated by minimum wage legislation and minimum labor standard. We derive the equilibrium strategies in, and compare the expected procurement costs among, the firstprice, second-price, English, and Dutch auctions in a private-cost model. For the English auction, we also consider a variant in which each seller can terminate the auction b...

In liberalized telecommunications markets, the incumbent typically enjoys several advantages over any entrant. Regulation in such asymmetric markets is successful if retail prices are low and the entrant’s pro...ts are high so that entry is encouraged. I show that asymmetric access price regulation with a cost-based access price for the incumbent and an access markup for the entrant is more suc...

In this article we develop a model for the commodity price dynamics under the risk-neutral measure where the spot price switches between two distinct stochastic processes depending on whether or not inventory is being held. Specifically, whenever the drift of the spot price exceeds the cost of carrying inventory (interest rate plus storage costs) the inventory is being held. Conversely, wheneve...

this paper represents a theoretical model from which the supply function for a durable goods is derived. it turns out that consumer at the equilibrium condition equates its user cost with the marginal value of services received by using an additional unit of durable goods. the stock price is obtained from this condition. in addition, at the equilbrium condition for producer, the stock price is ...