currently, a large number of products are being sold with warranty policies. pro-rata warranties are relatively a complex concept. this paper focuses on developing a new pro-rata warranty policy. in this model components of the product are grouped into two disjointed sets, failures of components belonging to set one are covered by prw warranty and those components that belonging to set two are ...

This study develops and estimates a stochastic volatility model of commodity prices that nests many of the previous models in the literature. The model is an affine three-factor model with one state variable driving the volatility and is maximal among all such models that are also identifiable. The model leads to quasianalytical formulas for futures and options prices. It allows for time-varyin...

We develop a theory of imperfect competition with loss-averse consumers. All consumers are fully informed about match value and price at the time they make their purchasing decision. However, a share of consumers are initially uncertain about their tastes and form a reference point consisting of an expected match value and an expected price distribution, while other consumers are perfectly info...

Proof of Proposition 1: The off-equilibrium path beliefs imply that any price offer below M(w) is definitely rejected, and any price offer above M(w̄) is definitely accepted. Any price offer v between M(w) and M(w̄) leads F to believe that w = M−1(v), and he is indifferent between accepting and rejecting it, making it optimal for him to randomize his acceptance decision. Finally, when the randomi...

This paper examines the impact of arbitrage costs on the level and duration of the disparity between price and accounting information about firm value. Arbitrage costs are expected to increase the disparity between price and value. However, by increasing the potential rewards to the arbitrageur, arbitrage costs may not necessarily impede the longer-term convergence of price to value. I use the ...

Until now the optimal reserve price in the independent private value paradigm has been expressed as a functional of the latent distribution of private signals which is by nature unobserved to the analyst. This feature has limited considerably the implementation of the optimal reserve price in practice. In this paper, we consider first-price auctions within the affiliated private values paradigm...

T single-product firms with different quality levels and fixed limited capacities engage in sequential price competition in an essentially deterministic model where customers have heterogeneous valuations for both products. We develop conditions under which the leader (she) can take strategic advantage of her limited capacity by pricing relatively low, purposefully creating shortages and leavin...

A commonly observed two-stage pricing strategy for a custom-made product involves a prepurchase entry fee for a potential consumer and a purchase price if he decides to buy the product. We solve and compare two settings: In the first, the firm does not commit in advance to the second-stage price and in the second, the firm does. We show that without a commitment mechanism, the two price points ...

The paper assesses the welfare effects of different ways of allocating input price risk between a regulated utility, consumers and speculators in a futures market. A risk-averse utility setting a fixed retail price requires a price that exceeds expected marginal cost, unless an efficient futures market is available. The firm bears no risk when input price risk is transferred to consumers, but c...

We study a risk-averse newsvendor problem with quantity competition and price competition. Under the Conditional Value-at-Risk (CVaR) criterion, we characterize the optimal quantity and pricing decisions under both quantity and price competition. For quantity competition, we consider two demand splitting rules, namely proportional demand allocation and demand reallocation. Although competition ...