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Price Competition (price + competition)
Selected AbstractsAn Empirical Investigation of Price Competition and Industry Specialisation in NHS Audit ServicesFINANCIAL ACCOUNTABILITY & MANAGEMENT, Issue 2 2005Ilias G. Basioudis The NHS audit market is regulated by the Audit Commission (AC) and has unique features. We develop a model for audit fees that includes rigorous analysis of the type of auditor. Poor financial standing does not give rise to higher audit fees. Despite regulation the study supports the existence of a Big Five price premium on the audit fee, but only one firm has a premium. We found no premium due to industry specialisation. The removal of performance audit from AC regulation will require improved audit fee reporting and control. [source] Learning and Noisy Equilibrium Behavior in an Experimental Study of Imperfect Price Competition*INTERNATIONAL ECONOMIC REVIEW, Issue 3 2002C. Monica Capra We consider a duopoly pricing game with a unique Bertrand,Nashequilibrium. The high-price firm has a nonvanishing market share, however, and intuition suggests that observed prices may be positively related to this market share. This relationship is implied by a model in which players make noisy (logit) best responses to expected payoff differences. The resulting logit equilibrium model was used to design an experiment in which the high-price firm's market share varies. The model accurately predicts the final-period price averages. A naive learning model predicts the observed differences in the time paths of average prices. [source] Consumer Stockpiling and Price Competition in Differentiated MarketsJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 4 2007Liang Guo In many storable-goods markets, firms are often aware that consumers may strategically adjust purchase timing in response to expected price dynamics. For example, in periods when prices are low, consumers stockpile for future consumption. This paper investigates the dynamic impact of consumer stockpiling on competing firms' strategic pricing decisions in differentiated markets. The necessity of equilibrium consumer storage for storable products is re-examined. It is shown that preference heterogeneity generates differential consumer stockpiling propensity, thereby intensifying future price competition. As a result, consumer storage may not necessarily arise as an equilibrium outcome. Economic forces are also investigated that may mitigate the competition-intensifying effect of consumer inventories and that, hence, may lead to equilibrium consumer storage. [source] Price Competition, Business Hours and Shopping Time Flexibility,THE ECONOMIC JOURNAL, Issue 531 2008Oz Shy We analyse retail industries with two-stage competition in opening hours and prices. We explore the effects of consumers' shopping time flexibility by comparing bi-directional consumers with forward- or backward-oriented consumers, who can either postpone or advance their shopping, but not both. We demonstrate that retailers with longer opening hours charge higher prices and that opening hour differentiation softens price competition. We show that competition does not create incentives for retailers to expand their business hours beyond social optimum. In this respect our model does not justify restrictions on shopping hours. [source] Optimal Quotas, Price Competition And Products' AttributesTHE JAPANESE ECONOMIC REVIEW, Issue 4 2003Nicolas Boccard We characterize the Nash equilibrium in the Hotelling model in the presence of an import quota. The optimal quota is identified and shown to be invariant to the mode of competition. We also prove that in the presence of a quota maximal differentiation is not achieved at equilibrium. [source] Price competition under universal service obligationsINTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 3 2010Axel Gautier L13; L51 In industries like telecom, postal services or energy provision, universal service obligations (uniform price and universal coverage) are often imposed on one market participant. Universal service obligations are likely to alter firms' strategic behavior in such competitive markets. In the present paper, we show that, depending on the entrant's market coverage and the degree of product differentiation, the Nash equilibrium in prices involves either pure or mixed strategies. We show that the pure strategy market sharing equilibrium, as identified by Valletti, Hoernig, and Barros (2002), defines a lower bound on the level of equilibrium prices. [source] Food trade balances and unit values: What can they reveal about price competition?AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 1 2002Mark J. Gehlhar Price competition is a fundamental assumption in modeling trade. Empirical applications often use unit values as proxies for price. This is a problem if unit values cannot explain trade flows consistent with the price competition assumption. The paper determines whether this condition exists in food product trade. Trade balances by product are used to indicate successful competition in trade. Export and import unit values are used to determine if competition is dominated by price or nonprice competition. Trade flows are then categorized in four ways: successful price competition, unsuccessful price competition, successful nonprice competition, and unsuccessful nonprice competition. This categorization is applied to 372 food products using the Standard International Trade Classification. Nearly 40% of U.S. food exports could be characterized as dominated by nonprice competition. In those instances, we contend that unit values are not valid proxies for price, thereby limiting their usefulness in traditional import demand estimation and trade policy simulation models. © 2002 Wiley Periodicals, Inc. [source] Price competition with elastic trafficNETWORKS: AN INTERNATIONAL JOURNAL, Issue 3 2008Asuman Ozdaglar Abstract In this paper, we present a combined study of price competition and traffic control in a congested network. We study a model in which service providers own the routes in a network and set prices to maximize their profits, while users choose the amount of flow to send and the routing of the flow according to Wardrop's principle. When utility functions of users are concave and have concave first derivatives, we characterize a tight bound of 2/3 on efficiency in pure strategy equilibria of the price competition game. We obtain the same bound under the assumption that there is no fixed latency cost, i.e., the latency of a link at zero flow is equal to zero. These bounds are tight even when the numbers of routes and service providers are arbitrarily large. © 2008 Wiley Periodicals, Inc. NETWORKS, 2008 [source] IS TRUST A DRIVER FOR TERRITORIALLY EMBEDDED INDUSTRIAL SYSTEMS?GEOGRAFISKA ANNALER SERIES B: HUMAN GEOGRAPHY, Issue 4 2007A CASE STUDY OF THE HOME-BUILDING INDUSTRY IN NORWAY ABSTRACT Trust is said to be necessary for creating and maintaining territorially embedded industrial systems. On the basis of data for the Norwegian home-building sector, this article analyses trust and price competition; how trust is built and dismantled; and trust and place. The main findings are that: trust and price competition interact, but trust is more important in the design and planning phases than in the construction phase; economic factors are important for building trust, together with competence and team work; and trust is related to space, partly through places embodied in trust and partly through trust embedded in places. However, this embeddedness is not like that which has long been claimed to exist in territorially embedded industrial systems, but embeddedness where trust acts as a reinforcement, contingent upon other factors, as a capacity restraint and a socially constructed need for face-to-face meetings. [source] Process and product innovation: A differential game approach to product life cycleINTERNATIONAL JOURNAL OF ECONOMIC THEORY, Issue 2 2010Luca Lambertini C73; D43; D92; O31 We investigate the timing of adoption of product and process innovation using a differential game where firms may invest in both activities. We consider horizontal product innovation that reduces product substitutability, and process innovation that reduces marginal cost. First, we demonstrate that the incentive for cost-reducing investment is relatively higher than the incentive to increase product differentiation. Second, depending on initial conditions: (i) firms activate both types of investment from the very outset to the steady state; (ii) firms initially invest in only one R&D activity and then reach the steady state either carrying out only this activity or carrying out both; or (iii) firms do not invest at all in either type of innovation. Comparing R&D investments under Cournot and Bertrand behavior shows that quantity competition entails lower R&D incentives than price competition in both directions. [source] Consumer Stockpiling and Price Competition in Differentiated MarketsJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 4 2007Liang Guo In many storable-goods markets, firms are often aware that consumers may strategically adjust purchase timing in response to expected price dynamics. For example, in periods when prices are low, consumers stockpile for future consumption. This paper investigates the dynamic impact of consumer stockpiling on competing firms' strategic pricing decisions in differentiated markets. The necessity of equilibrium consumer storage for storable products is re-examined. It is shown that preference heterogeneity generates differential consumer stockpiling propensity, thereby intensifying future price competition. As a result, consumer storage may not necessarily arise as an equilibrium outcome. Economic forces are also investigated that may mitigate the competition-intensifying effect of consumer inventories and that, hence, may lead to equilibrium consumer storage. [source] Property Rights Protection of Biotechnology InnovationsJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 4 2005Diana M. Burton Protection of intellectual property embedded in self-replicating biological innovations, such as genetically modified seed, presents two problems for the innovator: the need for copy protection of intellectual property and price competition between new seed and reproduced seed. We consider three regimes in two periods with asymmetric information: short-term contracts, biotechnological protection, and long-term contracts. We find that piracy imposes more intense competition for seed sales than does durability alone. Technology protection systems yield highest firm profit and long-term contracts outperform short-term contracts. Farmers prefer, in order, long-term, short-term, and biotechnical protection. Depending on monitoring cost, long-term contracts may be socially preferred to short-term contracts, with both preferred to biotechnical protection. [source] Strategic Quality Decisions under Heterogeneous Resource EndowmentsJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 2 2001Byong-Duk Rhee The literature on product competition advocates a differentiation strategy assuming firm homogeneity in resources. However, firm heterogeneity in resource endowments has long been recognized in economics. Merging these two perspectives, we show that the increase in consumer preference for quality leads to firms' aggressive price competition instead of quality differentiation. As consumers look for higher quality, the cost advantage arising from superior resources increases and makes head-to-head competition more profitable than accommodating a less efficient rival. When consumers are highly concerned about quality, even a small resource difference leads a more efficient firm to initiate cutthroat price competition for market dominance. [source] Price and Nonprice Competition with Endogenous Market StructureJOURNAL OF ECONOMICS & MANAGEMENT STRATEGY, Issue 1 2000George Symeonidis This paper examines the effect of the intensity of short-run price competition and other exogenous variables that affect gross profit margins,such as the degree of product differentiation and the consumers' responsiveness to quality,on market structure and on advertising and R&D expenditure. A key result is that more intense short-run competition can lead to lower concentration in industries with high advertising or R&D intensity, unlike exogenous-sunk-cost industries. Also, price competition has a negative effect on advertising or R&D expenditure. A case study is also presented, which is consistent with the theoretical results of the paper. [source] Demand for differentiated milk products: implications for price competitionAGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 4 2009Elena Lopez The authors apply the Berry, Levinsohn, and Pakes (1995) model to scan data from Boston supermarkets augmented with consumer characteristics data to analyze consumer choices and price competition in a differentiated fluid milk market. Milk characteristics include price, fat content, brand name, and the organic and/or lactose-free nature of the product. Empirical results show that consumer valuation of fat decreases with income, but increases with the number of children. Low-fat and specialty milks, such as organic and lactose-free milks, are preferred by high-income consumers with no children. Although all milks are price elastic at the individual brand level, the cross-price elasticities are quite low and negligible for specialty milks. Based on calculated Lerner indexes, private label milks have the highest percent markups despite their lower prices, whereas specialty milks have the lowest markups despite their higher prices, which attests to a greater degree of market power for conventional and particularly for private label milk. [JEL Classification: D12, D40, L11, L81]. © 2009 Wiley Periodicals, Inc. [source] Food trade balances and unit values: What can they reveal about price competition?AGRIBUSINESS : AN INTERNATIONAL JOURNAL, Issue 1 2002Mark J. Gehlhar Price competition is a fundamental assumption in modeling trade. Empirical applications often use unit values as proxies for price. This is a problem if unit values cannot explain trade flows consistent with the price competition assumption. The paper determines whether this condition exists in food product trade. Trade balances by product are used to indicate successful competition in trade. Export and import unit values are used to determine if competition is dominated by price or nonprice competition. Trade flows are then categorized in four ways: successful price competition, unsuccessful price competition, successful nonprice competition, and unsuccessful nonprice competition. This categorization is applied to 372 food products using the Standard International Trade Classification. Nearly 40% of U.S. food exports could be characterized as dominated by nonprice competition. In those instances, we contend that unit values are not valid proxies for price, thereby limiting their usefulness in traditional import demand estimation and trade policy simulation models. © 2002 Wiley Periodicals, Inc. [source] Deregulation and the Racial Composition of AirlinesJOURNAL OF POLICY ANALYSIS AND MANAGEMENT, Issue 2 2001Jacqueline Agesa Economic theory suggests that the enhanced product market competition of deregulation reduces employers' ability to discriminate when hiring. Recent studies of the effect of deregulation on racial employment in the naturally competitive trucking industry find that deregulation increased minority employment. This study examines the effect of deregulation on racial employment in the airline industry. Because deregulation transformed airlines from wasteful service competition to rigorous price competition, deregulation's effect on racial hiring in this continuously competitive industry is not apparent. This study finds that deregulation only modestly changed the racial composition of major airline occupations, which suggests that the change in market structure as a result of deregulation may largely determine the effect of regulatory reform on the racial composition of an industry. © 2001 by the Association for Public Policy Analysis and Management. [source] Competition in prescription drug markets: is parallel trade the answer?MANAGERIAL AND DECISION ECONOMICS, Issue 5 2010Panos Kanavos This article uses a price determination model with dynamic panel data estimation to examine the extent to which pharmaceutical parallel trade promotes price competition and leads to downward price convergence. Little evidence of sustainable price competition is found. We find that prices are mainly affected by regulation and by competition in the wholesale distribution chain; that the pricing strategy of parallel distributors resembles that of originator drugs in importing countries; and that there may be upward rather than downward price convergence. Drawing on the European evidence, the findings also indicate that opening the US market to parallel imports will not necessarily lead to competition and enhance pharmaceutical cost containment. Copyright © 2010 John Wiley & Sons, Ltd. [source] Discriminatory input pricing and strategic delegationMANAGERIAL AND DECISION ECONOMICS, Issue 4 2010Pei-Cheng Liao This paper examines how discriminatory input pricing by an upstream monopolist affects the incentives that owners of downstream duopolists offer their managers. Regardless of the mode of competition (quantity or price), owners of downstream firms induce their managers to be more profit-oriented and to behave less aggressively when the monopolist is allowed to price-discriminate than when he charges a uniform price. If the monopolist price-discriminates, managerial downstream firms always earn more than owner-managed profit-maximizing firms. However, if the monopolist charges a uniform price, managerial downstream firms earn more than profit-maximizing counterparts under price competition and earn less under quantity competition. Copyright © 2009 John Wiley & Sons, Ltd. [source] Endogenous timing in a mixed duopoly: price competition with managerial delegationMANAGERIAL AND DECISION ECONOMICS, Issue 5 2009Yasuhiko Nakamura We introduce a managerial delegation contract into the mixed duopoly model and examine its influence on price setting in a mixed duopoly in the context of the endogenous-timing problem. We obtain the result that owners of a public and a private firm prefer to delay the setting of the prices of their products as much as possible. Thus, in equilibrium, the firms choose their prices simultaneously in the latter stage of the game. This is in contrast to the findings of the entrepreneurial case, according to which firms choose prices simultaneously in the former stage. Copyright © 2009 John Wiley & Sons, Ltd. [source] Strategic behavior in a service industryMANAGERIAL AND DECISION ECONOMICS, Issue 2 2002Pekka Ilmakunnas A model of service duopoly is formulated, where the arrival of customers and their service time in the firm are stochastic. The firms first choose the service capacity, and given the capacity they then choose the price in a Bertrand competition. Capacity choices have a negative externality on the competitor, since increased capacity in one firm decreases its expected full price (price plus cost of waiting) and leads to a flow of customers from the other firm. If the firms choose capacities strategically, it is optimal to underinvest compared to the non-strategic case, but this result may arise in different ways. By underinvesting the firms commit themselves to longer queues (lower quality) to relax price competition. Copyright © 2002 John Wiley & Sons, Ltd. [source] Survivorship in the US hospital services industryMANAGERIAL AND DECISION ECONOMICS, Issue 5 2000Rexford E. Santerre Over the last two decades, changing state and federal regulations and increased price competition have dramatically changed the environment in which hospitals compete. This paper uses observations drawn at 5-year intervals from 1973 to 1993 for each of the 50 states to examine the specific effect of these factors on the size distribution of hospitals. It finds that Certificate of Need (CON) laws and rate review regulations have tended to favor large hospitals. The paper also finds that hospitals have responded to increased payer price sensitivity by seeking a medium bed-size capacity. Copyright © 2000 John Wiley & Sons, Ltd. [source] Price competition with elastic trafficNETWORKS: AN INTERNATIONAL JOURNAL, Issue 3 2008Asuman Ozdaglar Abstract In this paper, we present a combined study of price competition and traffic control in a congested network. We study a model in which service providers own the routes in a network and set prices to maximize their profits, while users choose the amount of flow to send and the routing of the flow according to Wardrop's principle. When utility functions of users are concave and have concave first derivatives, we characterize a tight bound of 2/3 on efficiency in pure strategy equilibria of the price competition game. We obtain the same bound under the assumption that there is no fixed latency cost, i.e., the latency of a link at zero flow is equal to zero. These bounds are tight even when the numbers of routes and service providers are arbitrarily large. © 2008 Wiley Periodicals, Inc. NETWORKS, 2008 [source] EXPORT SUBSIDIES, COST DIFFERENTIAL AND PRODUCT QUALITYPACIFIC ECONOMIC REVIEW, Issue 1 2010Hong Hwang This paper presents a vertical product differentiation model to examine the relationship between optimal trade policies and product qualities for different export countries under Cournot quantity competition as well as Bertrand price competition. We can also use this quality model to explain why Japan as a high production-cost country may have incentives to offer high subsidies. This is a case that cannot be explained by the strategic trade theory models à la Brander and Spencer (1985) or Eaton and Grossman (1986). [source] Strategic Interaction amongst Australia's East Coast PortsTHE AUSTRALIAN ECONOMIC REVIEW, Issue 3 2007Flavio M. Menezes Australia's principal container ports, located in its state capitals, are owned and operated by state authorities that largely return profits from port operations to state governments. Since they govern the volumes of trade in most merchandise, they command immense influence over the openness and flexibility of the national economy. In this study, we estimate the elasticities of substitution between container services of ports in Brisbane, Sydney and Melbourne. We also examine the pricing of port services to estimate the extent of their interaction, from which we derive conjectural variations parameters to assess the actual and potential levels of price collusion. The results confirm the conventional wisdom that the degree of substitution between the major east coast ports is small. While this highlights the possibility that these ports possess substantial market power, actual mark ups are considerably smaller than the predicted mark ups, suggesting that the ports' localised monopoly power is constrained by factors other than price competition. [source] Price Competition, Business Hours and Shopping Time Flexibility,THE ECONOMIC JOURNAL, Issue 531 2008Oz Shy We analyse retail industries with two-stage competition in opening hours and prices. We explore the effects of consumers' shopping time flexibility by comparing bi-directional consumers with forward- or backward-oriented consumers, who can either postpone or advance their shopping, but not both. We demonstrate that retailers with longer opening hours charge higher prices and that opening hour differentiation softens price competition. We show that competition does not create incentives for retailers to expand their business hours beyond social optimum. In this respect our model does not justify restrictions on shopping hours. [source] Exchange Rates and Cash Flows in Differentiated Product Industries: A Simulation ApproachTHE JOURNAL OF FINANCE, Issue 5 2007RICHARD FRIBERG ABSTRACT How do exchange rate changes impact firms' cash flows? We extend a simulation method developed in industrial organization to answer this question. We use prices, quantities, and product characteristics for differentiated products, coupled with a discrete choice framework and an assumption of price competition, to estimate marginal costs for all producers. Using a Monte Carlo approach we generate counterfactual prices and profits for different levels of exchange rates. We illustrate the method using the market for bottled water. Our results stress that even in a relatively simple market such as this one, different brands face very different exchange rate risks. [source] PATENT DAMAGES AND SPATIAL COMPETITION,THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 2 2010MATTHEW D. HENRY We analyze price competition between a spatially differentiated product patentee and an imitator anticipating probabilistic future patent damages. We compare the performance of three damage regimes. The ,reasonable royalty' regime, which yields symmetric equilibrium pricing, maximizes static welfare and yields the highest innovation incentives when patent enforcement is nearly certain. The ,lost profits' regime, which may deter infringement, yields the highest innovation incentives when patent enforcement is less-than-certain and products are sufficiently valuable. The ,unjust enrichment' regime yields low static efficiency and low innovation incentives. We offer new insights into the ,hypothetical negotiation' that courts use to construct reasonable royalties. [source] MANAGERIAL INCENTIVES AND THE PRICE EFFECTS OF MERGERS,THE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 3 2005Abraham L. Wickelgren Most analysis of market power assumes that managers are perfect agents for shareholders. This paper relaxes that assumption. When managers of a multi-product firm exert unobservable effort to improve product quality, there is a trade-off between providing adequate effort incentives and ensuring sufficient price-coordination between the product divisions. This makes some intra-firm price competition optimal, explaining why many multi-product firms allow for competition between divisions. When there are effort spillovers, the optimal amount of price competition can be as great as when the products are under separate ownership. Even with some profit-sharing, intra-firm price competition can reduce quality-adjusted price, which has important implications for antitrust policy. [source] Technological Incompatibility, Endogenous Switching Costs and Lock-inTHE JOURNAL OF INDUSTRIAL ECONOMICS, Issue 3 2001Begoña Garcia Mariñoso Systems are goods comprising of durables that are sequentially updated with complements. With sequential purchases, if suppliers produce incompatible brands, consumers who upgrade systems with complements of a different brand must replace the durables they own. Thus, the price of these durables is an endogenous switching cost. The paper deals with the concern that firms may use incompatibility to create consumer's switching costs to reduce competition in aftermarkets. However, it shows that, with homogenous durables, and small costs of reaching compatibility, endogenous switching costs increase intertemporal price competition to the extent that producers prefer to have compatible technologies. [source] | |||||||||||||