Christian M. Dippon, James Alleman, Teodosio Pérez Amaral, Aniruddha Banerjee, Gaël Campan, J. Church, R. Crandall, Eric Fruits, Eric Fruits, Bronwyn E. Howell, J. Hausman, J. Hausman, J. Hurwitz, Mark A. Jamison, Seongcheol Kim, Roslyn Layton, S. Levin, Daniel A. Lyons, Geoffrey A. Manne, P. Potgieter, Paul N. Rappoport, G. Serentschy, L. Taylor, L. Taylor, Dennis L. Weisman, J. Whalley, Xu Yan
Rewheel, a Finnish consultancy, periodically issues reports that it portrays as international competitiveness comparisons of retail prices for mobile wireless services across the globe. However, these comparisons are not accurate representations of the state of competition in the mobile wireless world. In these reports, Rewheel assigns providers and countries international ranks and labels competitive/non-competitive. While the internet is a fabulous means of communications, the Digital Fuel Monitor by Rewheel/research is a prime example of online misinformation. To curb the spread of false information, social media platforms have started applying warning labels to content they believe the facts do not support. Still, far too many false claims have attracted attention because separating fact from fiction often requires specific expertise. Given the many theoretical and practical flaws and errors contained in the Rewheel study, the authors find it of no value when comparing prices internationally or establishing the level of competition in a country. A warning label informing readers about the lack of intellectual rigor and the misleading and incorrect nature of the Rewheel study’s results is appropriate and recommended.
{"title":"Adding a Warning Label to Rewheel’s International Price Comparison and Competitiveness Rankings","authors":"Christian M. Dippon, James Alleman, Teodosio Pérez Amaral, Aniruddha Banerjee, Gaël Campan, J. Church, R. Crandall, Eric Fruits, Eric Fruits, Bronwyn E. Howell, J. Hausman, J. Hausman, J. Hurwitz, Mark A. Jamison, Seongcheol Kim, Roslyn Layton, S. Levin, Daniel A. Lyons, Geoffrey A. Manne, P. Potgieter, Paul N. Rappoport, G. Serentschy, L. Taylor, L. Taylor, Dennis L. Weisman, J. Whalley, Xu Yan","doi":"10.2139/ssrn.3740153","DOIUrl":"https://doi.org/10.2139/ssrn.3740153","url":null,"abstract":"Rewheel, a Finnish consultancy, periodically issues reports that it portrays as international competitiveness comparisons of retail prices for mobile wireless services across the globe. However, these comparisons are not accurate representations of the state of competition in the mobile wireless world. In these reports, Rewheel assigns providers and countries international ranks and labels competitive/non-competitive. While the internet is a fabulous means of communications, the Digital Fuel Monitor by Rewheel/research is a prime example of online misinformation. To curb the spread of false information, social media platforms have started applying warning labels to content they believe the facts do not support. Still, far too many false claims have attracted attention because separating fact from fiction often requires specific expertise. Given the many theoretical and practical flaws and errors contained in the Rewheel study, the authors find it of no value when comparing prices internationally or establishing the level of competition in a country. A warning label informing readers about the lack of intellectual rigor and the misleading and incorrect nature of the Rewheel study’s results is appropriate and recommended.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"91 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"126148970","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Abstract We examine the effects of dealers’ inventories on the pricing and liquidity of OTC derivatives markets. Using position and pricing data on credit default swap (CDS) indices, we document that the change in index CDS spreads is negatively associated with the change in dealers’ net long positions. The effect of dealer inventory on CDS spreads is stronger after the Volcker Rule is implemented in the United States. Furthermore, the divergence between index CDS spreads and their theoretical values (index basis) is also negatively associated with dealers’ net long positions. Finally, bid-ask spreads and the number of dealers increase when the inventory position of dealers is larger.
{"title":"Dealer Inventory, Pricing, and Liquidity in the OTC Derivatives Markets: Evidence from Index CDSs","authors":"Xinjie Wang, Z. Zhong","doi":"10.2139/ssrn.3294837","DOIUrl":"https://doi.org/10.2139/ssrn.3294837","url":null,"abstract":"Abstract We examine the effects of dealers’ inventories on the pricing and liquidity of OTC derivatives markets. Using position and pricing data on credit default swap (CDS) indices, we document that the change in index CDS spreads is negatively associated with the change in dealers’ net long positions. The effect of dealer inventory on CDS spreads is stronger after the Volcker Rule is implemented in the United States. Furthermore, the divergence between index CDS spreads and their theoretical values (index basis) is also negatively associated with dealers’ net long positions. Finally, bid-ask spreads and the number of dealers increase when the inventory position of dealers is larger.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-11-04","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123912560","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We analyze the interaction between firms' payout policies and their decisions in product markets in a continuous-time stochastic game between two firms. One of these is financially constrained, whereas the other is not. Contrary to the standard literature we allow firms to choose production and payout strategies, and focus on the effect of predation incentives on both. We find that predation induces fewer dividend payouts. Furthermore, the liquidity position of the constrained firm has an economically significant effect on the production choices of both firms and, thus, on the evolution of profits, cash holdings and stock returns.
{"title":"Predatory Pricing and the Value of Corporate Cash Holdings","authors":"M. Lavrutich, J. Thijssen","doi":"10.2139/ssrn.3695184","DOIUrl":"https://doi.org/10.2139/ssrn.3695184","url":null,"abstract":"We analyze the interaction between firms' payout policies and their decisions in product markets in a continuous-time stochastic game between two firms. One of these is financially constrained, whereas the other is not. Contrary to the standard literature we allow firms to choose production and payout strategies, and focus on the effect of predation incentives on both. We find that predation induces fewer dividend payouts. Furthermore, the liquidity position of the constrained firm has an economically significant effect on the production choices of both firms and, thus, on the evolution of profits, cash holdings and stock returns.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"103 10 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-30","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"115733628","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Recent research shows prices are insensitive to local demand conditions because national chains charge geographically uniform prices. We examine the price response to local cost shocks, including 68 excise tax changes, 76 sales tax changes, and other geographically-based cost differences, using data on 35,151 retail stores in 143 multi-state chains. We find local cost shocks are passed-through to local prices, with no spillovers to unaffected stores in otherwise affected chains, and at similar rates for national and local chains. Firms adjust local prices according to local cost changes, suggesting retailers respond asymmetrically to local cost and demand shocks.
{"title":"How Do National Firms Respond to Local Shocks?","authors":"R. Butters, Daniel W. Sacks, Boyoung Seo","doi":"10.2139/ssrn.3535206","DOIUrl":"https://doi.org/10.2139/ssrn.3535206","url":null,"abstract":"Recent research shows prices are insensitive to local demand conditions because national chains charge geographically uniform prices. We examine the price response to local cost shocks, including 68 excise tax changes, 76 sales tax changes, and other geographically-based cost differences, using data on 35,151 retail stores in 143 multi-state chains. We find local cost shocks are passed-through to local prices, with no spillovers to unaffected stores in otherwise affected chains, and at similar rates for national and local chains. Firms adjust local prices according to local cost changes, suggesting retailers respond asymmetrically to local cost and demand shocks.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"574 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-29","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"123127750","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
We study the competitive and welfare effects of wholesale price-parity agreements. These contracts prevent a monopolist, who sells its product to final consumers both directly and indirectly through alternative distribution channels, to charge different input (wholesale) prices to competing intermediaries (e.g., platforms). In a multi-channel and multi-layered industry, organized as an agency business model, we find that the monopolist and the intermediaries do not necessarily have aligned incentives concerning the introduction of wholesale price-parity. While these agreements always hurt the monopolist, they may benefit the intermediaries when competition between the direct and the indirect distribution channels is sufficiently intense. Moreover, when this is the case, in contrast to retail price-parity agreements that typically reduce consumer welfare, wholesale price-parity benefits consumers.
{"title":"When Prohibiting Wholesale Price-Parity Agreements Harms Consumers","authors":"Michele Bisceglia, Jorge Padilla, S. Piccolo","doi":"10.2139/ssrn.3701149","DOIUrl":"https://doi.org/10.2139/ssrn.3701149","url":null,"abstract":"We study the competitive and welfare effects of wholesale price-parity agreements. These contracts prevent a monopolist, who sells its product to final consumers both directly and indirectly through alternative distribution channels, to charge different input (wholesale) prices to competing intermediaries (e.g., platforms). In a multi-channel and multi-layered industry, organized as an agency business model, we find that the monopolist and the intermediaries do not necessarily have aligned incentives concerning the introduction of wholesale price-parity. While these agreements always hurt the monopolist, they may benefit the intermediaries when competition between the direct and the indirect distribution channels is sufficiently intense. Moreover, when this is the case, in contrast to retail price-parity agreements that typically reduce consumer welfare, wholesale price-parity benefits consumers.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"37 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-28","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"129591420","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This paper studies the costs and benefits of price leadership in a retail gasoline market with asymmetric price cycles. A unique dataset with high frequency price and volume data for almost all Norwegian gas stations coupled with a particular pricing pattern allow me to provide the first concrete evidence on the costs and benefits of leading price jumps. The main result is that the leader’s volume loss ensuing from being alone with a high price until the other firms match the price increase, is small compared to the large margin increases and profit gains resulting from the price jumps. Furthermore, I find that the leader is not worse off than the non-leading firms.
{"title":"The Costs and Benefits of Price Leadership - Evidence from Retail Gasoline","authors":"Andreas Tveito","doi":"10.2139/ssrn.3727890","DOIUrl":"https://doi.org/10.2139/ssrn.3727890","url":null,"abstract":"This paper studies the costs and benefits of price leadership in a retail gasoline market with asymmetric price cycles. A unique dataset with high frequency price and volume data for almost all Norwegian gas stations coupled with a particular pricing pattern allow me to provide the first concrete evidence on the costs and benefits of leading price jumps. The main result is that the leader’s volume loss ensuing from being alone with a high price until the other firms match the price increase, is small compared to the large margin increases and profit gains resulting from the price jumps. Furthermore, I find that the leader is not worse off than the non-leading firms.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"1 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-21","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"122440753","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
I examine the case of a firm that practices both second-degree and third-degree price discrimination. I present a model showing conditions under which the premium for higher quality can either rise or fall as the firm implements group pricing. I then use new data from a regional airline to estimate how the two kinds of price discrimination interact, and how each is affected by changes in competition. I establish three key results, all new to the literature. First, in different markets, the two kinds of price discrimination can either offset or reinforce each other, in a manner that fits the model's predictions. Second, inter-temporal differences in prices are purely driven by price discrimination, rather than by scarcity pricing. Third, competition increases the extent of both kinds of price discrimination.
{"title":"Price Discrimination along Multiple Dimensions: New Evidence from a Regional Airline","authors":"Ambarish Chandra","doi":"10.2139/ssrn.3694848","DOIUrl":"https://doi.org/10.2139/ssrn.3694848","url":null,"abstract":"I examine the case of a firm that practices both second-degree and third-degree price discrimination. I present a model showing conditions under which the premium for higher quality can either rise or fall as the firm implements group pricing. I then use new data from a regional airline to estimate how the two kinds of price discrimination interact, and how each is affected by changes in competition. I establish three key results, all new to the literature. First, in different markets, the two kinds of price discrimination can either offset or reinforce each other, in a manner that fits the model's predictions. Second, inter-temporal differences in prices are purely driven by price discrimination, rather than by scarcity pricing. Third, competition increases the extent of both kinds of price discrimination.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"61 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"127232943","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Economists usually assume that price and quantity are continuous variables, while most market designs, in reality, impose discrete tick and lot sizes. We study a firm’s trade-off between these two discretenesses in U.S. stock exchanges, which mandate a one-cent minimum tick size and a 100-share minimum lot size. A uniform tick size favors high prices because the bid–ask spread cannot be lower than one cent. A uniform lot size favors low prices because low prices reduce adverse selection costs for market makers when they have to display at least 100 shares. We predict that a firm achieves its optimal price when its bid–ask spread is two ticks wide, when the marginal contribution from discrete prices equals that from discrete lots. Empirically, we find that stock splits improve liquidity when they move the bid–ask spread towards two ticks; otherwise, they reduce liquidity. Liquidity improvements contribute 95 bps to the average total return on a split announcement of 272 bps. Optimal pricing can increase the median U.S. stock value by 69 bps and total U.S. market capitalization by $54.9 billion.
{"title":"The Tradeoff between Discrete Pricing and Discrete Quantities: Evidence from U.S.-listed Firms","authors":"Sida Li, Mao Ye","doi":"10.2139/ssrn.3763516","DOIUrl":"https://doi.org/10.2139/ssrn.3763516","url":null,"abstract":"Economists usually assume that price and quantity are continuous variables, while most market designs, in reality, impose discrete tick and lot sizes. We study a firm’s trade-off between these two discretenesses in U.S. stock exchanges, which mandate a one-cent minimum tick size and a 100-share minimum lot size. A uniform tick size favors high prices because the bid–ask spread cannot be lower than one cent. A uniform lot size favors low prices because low prices reduce adverse selection costs for market makers when they have to display at least 100 shares. We predict that a firm achieves its optimal price when its bid–ask spread is two ticks wide, when the marginal contribution from discrete prices equals that from discrete lots. Empirically, we find that stock splits improve liquidity when they move the bid–ask spread towards two ticks; otherwise, they reduce liquidity. Liquidity improvements contribute 95 bps to the average total return on a split announcement of 272 bps. Optimal pricing can increase the median U.S. stock value by 69 bps and total U.S. market capitalization by $54.9 billion.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"46 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-09-12","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130778095","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
Firms often engage in price promotion wars to gain market share from their competitors. However, poor customer satisfaction as a result of limited service capacity may significantly impact such a pricing strategy. In this paper, we consider a two-firm price competition model in which customers’ purchase decisions are affected by their anticipation of a poor service encounter. Our equilibrium analysis reveals that firms would be less aggressive in engaging in price cutting when customers care more about service quality and when service capacity is relatively low. Interestingly, when service capacity is close (but not exact) to covering one half of the total market demand, firms would adopt a mixed strategy with randomized pricing, driven by unilateral motives to either capture more market share (by lowering prices) or increase profit margin (by raising prices). We further show that having a superior service capacity presents a competitive advantage for a firm and such advantage can be preemptive. In an extended two-period model that allows for customer switching after a poor service encounter, we find that when service capacity is relatively low, firms may offer deeper price discounts in the first period if customers are forward looking than if they are myopic. Our numerical study confirms that the main qualitative insights obtained in our base model continue to hold when the customer switching behavior is considered. This paper was accepted by Jay Swaminathan, operations management.
{"title":"Service Capacity and Price Promotion Wars","authors":"Junhyung Bae, Li Chen, S. Yao","doi":"10.2139/ssrn.3681688","DOIUrl":"https://doi.org/10.2139/ssrn.3681688","url":null,"abstract":"Firms often engage in price promotion wars to gain market share from their competitors. However, poor customer satisfaction as a result of limited service capacity may significantly impact such a pricing strategy. In this paper, we consider a two-firm price competition model in which customers’ purchase decisions are affected by their anticipation of a poor service encounter. Our equilibrium analysis reveals that firms would be less aggressive in engaging in price cutting when customers care more about service quality and when service capacity is relatively low. Interestingly, when service capacity is close (but not exact) to covering one half of the total market demand, firms would adopt a mixed strategy with randomized pricing, driven by unilateral motives to either capture more market share (by lowering prices) or increase profit margin (by raising prices). We further show that having a superior service capacity presents a competitive advantage for a firm and such advantage can be preemptive. In an extended two-period model that allows for customer switching after a poor service encounter, we find that when service capacity is relatively low, firms may offer deeper price discounts in the first period if customers are forward looking than if they are myopic. Our numerical study confirms that the main qualitative insights obtained in our base model continue to hold when the customer switching behavior is considered. This paper was accepted by Jay Swaminathan, operations management.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"13 1","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-08-27","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"130407084","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
This article extends to unequal rates of profits a derivation of prices of production from a linear program. A partition of the price-wage space is illustrated in an example with two produced commodities. The variation in the solution of the LP with perturbations of relative markups is illustrated. This analysis provides an intuitive explanation of how the re-switching of techniques and of how capital reversing can emerge in non-competitive markets.
{"title":"Visualizing the Effects of Markups on the Choice of Technique","authors":"R. Vienneau","doi":"10.2139/ssrn.3669952","DOIUrl":"https://doi.org/10.2139/ssrn.3669952","url":null,"abstract":"This article extends to unequal rates of profits a derivation of prices of production from a linear program. A partition of the price-wage space is illustrated in an example with two produced commodities. The variation in the solution of the LP with perturbations of relative markups is illustrated. This analysis provides an intuitive explanation of how the re-switching of techniques and of how capital reversing can emerge in non-competitive markets.","PeriodicalId":321987,"journal":{"name":"ERN: Pricing (Topic)","volume":"48 61","pages":"0"},"PeriodicalIF":0.0,"publicationDate":"2020-08-09","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":null,"resultStr":null,"platform":"Semanticscholar","paperid":"133323285","PeriodicalName":null,"FirstCategoryId":null,"ListUrlMain":null,"RegionNum":0,"RegionCategory":"","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":"","EPubDate":null,"PubModel":null,"JCR":null,"JCRName":null,"Score":null,"Total":0}
京公网安备 11010802042870号
京ICP备2023020795号-1
扫码关注我们
求助内容：
应助结果提醒方式：