Dynamic price competition with fixed capacities

Many revenue management (RM) industries are characterized by (a) fixed capacities in theshort term (e.g., hotel rooms, seats on an airline flight), (b) homogeneous products (e.g., twoairline flights between the same cities at similar times), and (c) customer purchasing decisionslargely influenced by price. Competition in these industries is also very high even with just twoor three direct competitors in a market. However, RM competition is not well understood andpractically all known implementations of RM software and most published models of RM donot explicitly model competition. For this reason, there has been considerable recent interestand research activity to understand RM competition. In this paper we study price competitionfor an oligopoly in a dynamic setting, where each of the sellers has a fixed number of unitsavailable for sale over a fixed number of periods. Demand is stochastic, and depending on howit evolves, sellers may change their prices at any time. This reflects the fact that firms constantly,and almost costlessly, change their prices (alternately, allocations at a price in quantity-basedRM), reacting either to updates in their estimates of market demand, competitor prices, orinventory levels. We first prove existence of a unique subgame-perfect equilibrium for a duopoly.In equilibrium, in each state sellers engage in Bertrand competition, so that the seller withthe lowest reservation value ends up selling a unit at a price that is equal to the equilibriumreservation value of the competitor. This structure hence extends the marginal-value conceptof bid-price control, used in many RM implementations, to a competitive model. In addition,we show that the seller with the lowest capacity sells all its units first. Furthermore, we extendthe results transparently to n firms and perform a number of numerical comparative staticsexploiting the uniqueness of the subgame-perfect equilibrium.

The impact of the reference price system on the pharmaceutical market: A theoretical approach

This article analyses the impact of the reference pricesystem on the price-setting strategies of thepharmaceutical firms and on the level of generic usage.This model is the first to take explicitly into accountthe impact of the reference price mechanism on the levelof competition between brand-name and generic drugs andnational pharmaceutical spending. We consider aduopolistic model with one firm producing the brand-namedrug, whose patent has already expired, and the otherproducing the corresponding generic version. We work ina partial equilibrium framework where firms set pricessequentially and consumers face heterogeneous switchingcosts.We show that brand producers compensate thedecline of profits by selling greater quantities insteadof charging higher prices, thus fostering pricecompetition in the pharmaceutical market. This result isa consequence of both the assumption of a verticallydifferentiated model and the introduction of thereference price system.

An ASsessment of Relationship between Students' Perception of Social Studies and their Academic Performance in Colleges of Education in Kaduna State

The objective of this study was to find out the relationship between students’ perception of Social Studies and their academic performance in the subject in Colleges of Education in Kaduna State. The respondents of the study comprised NCE 2 and NCE 3 students of Social Studies at the Federal College of Education in Zaria and the Kaduna State College of Education in Gidan Waya. The data for the study was collected using a questionnaire with reliability coefficient of 0.87. The Pearson’s Product Moment Correlation Coefficient was used to test the hypotheses formulated for the study. The hypotheses were tested at 0.05 level of significance with df = 232. The findings were as follows: 1. The Social Studies students in colleges of education in Kaduna State do not record high academic performance in the subject. 2. Students’ perception of the Social Studies curriculum does affect their academic performance in the subject 3. Students’ perception of relevance of Social Studies education has no bearing on their academic performance in the subject. 4. Students’ perception of public attitude towards Social Studies has no impact on their academic performance in the subject. 5. Students’ general perception of Social Studies does not affect their academic performance in the subject. Based on these findings the following recommendations were proffered for Social Studies researchers and policy makers. a. There is need for further research in order to determine the actual cause of students’ failure to display high performance in Social Studies. b. The NCE Social Studies curriculum should be reviewed in terms of volume and difficulty.

Relative price riddles in international business cycle theory: Are transport costs the explanation?

We study relative price behavior in an international business cyclemodel with specialization in production, in which a goods marketfriction is introduced through transport costs. The transporttechnology allows for flexible transport costs. We analyze whetherthis extension can account for the striking differences betweentheory and data as far as the moments of terms of trade and realexchange rates are concerned. We find that transport costs increaseboth the volatility of the terms of trade and the volatility of thereal exchange rate. However, unless the transport technology isspecified by a Leontief technology, transport costs do not resolvethe quantitative discrepancies between theory and data. Asurprising result is that transport costs may actually lower thepersistence of the real exchange rate, a finding that is in contrastto much of the emphasis of the empirical literature.

Consumer Advisory Bulletin, Price-Gouging Rule in Effect in Storm- and Flood-damaged Counties, August 2007

The Attorney General’s Consumer Protection Division receives hundreds of calls and consumer complaints every year. Follow these tips to avoid unexpected expense and disappointments. This record is about: Price-Gouging Rule in Effect in Storm- and Flood-damaged Counties

Price increase and stability with new entries in Cournot markets

It is widely accepted in the literature about the classicalCournot oligopoly model that the loss of quasi competitiveness is linked,in the long run as new firms enter the market, to instability of the equilibrium. In this paper, though, we present a model in which a stableunique symmetric equilibrium is reached for any number of oligopolistsas industry price increases with each new entry. Consequently, the suspicion that non quasi competitiveness implies, in the long run, instabilityis proved false.

Endogenous price leadership

We consider a linear price setting duopoly game with di®erentiatedproducts and determine endogenously which of the players will lead andwhich will follow. While the follower role is most attractive for each firm, we show that waiting is more risky for the low cost firm so that,consequently, risk dominance considerations, as in Harsanyi and Selten(1988), allow the conclusion that only the high cost firm will choose towait. Hence, the low cost firm will emerge as the endogenous price leader.

Strategic behavior and price discovery

The paper analyzes the effects of strategic behavior by an insider in a price discovery process, akin to an information tatonnement, in the presence of a competitive informed sector. Such processes are used in the preopening period of continuous trading systems in several exchanges. It is found that the insider manipulates the market using a contrarian strategy in order to neutralize the effect of the trades of competitive informed agents. Furthermore, consistently with the empirical evidence available, we find that information revelation accelerates close to the opening, that the market price does not converge to the fundamental value no matter how many rounds the tatonnement has, and that the expected trading volume displays a U-shaped pattern. We also find that a market with a larger competitive sector (smaller insider) has an improved informational efficiency and an increased trading volume. The insider provides a public good (a lower informativeness of the price) for the competitive informed sector.

Perception of the damaging effects of smoking, and brief cessation counselling by doctors.

An open prospective study was conducted among the patients visiting an urban medical policlinic for the first time without an appointment to assess whether the immigrants (who represent more than half of our patients) are aware of the health effects of smoking, whether the level of acculturation influences knowledge, and whether doctors give similar advice to Swiss and foreign smokers. 226 smokers, 105 Swiss (46.5%), and 121 foreign-born (53.5%), participated in the study. 32.2% (95% CI [24.4%; 41.1%]) of migrants and 9.6% [5.3%; 16.8%] of Swiss patients were not aware of negative effects of smoking. After adjustment for age, the multivariate model showed that the estimated odds of "ignorance of health effects of smoking" was higher for people lacking mastery of the local language compared with those mastering it (odds ratio (OR) = 7.5 [3.6; 15.8], p < 0.001), and higher for men (OR = 4.3 [1.9; 10.0], p < 0.001). Advice to stop smoking was given with similar frequency to immigrants (31.9% [24.2%; 40.8%] and Swiss patients (29.0% [21.0%; 38.5%]). Nonintegrated patients did not appear to receive less counselling than integrated patients (OR = 1.1 [0.6; 2.1], p = 0.812). We conclude that the level of knowledge among male immigrants not integrated or unable to speak the local language is lower than among integrated foreign-born and Swiss patients. Smoking cessation counselling by a doctor was only given to a minority of patients, but such counselling seemed irrespective of nationality.

Endogenous price leadership

We consider a linear price setting duopoly game with differentiated products and determine endogenously which of the players will lead and which will follow. While the follower role is most attractive for each firm, we show that waiting is more risky for the low cost firm so that, consequently, risk dominance considerations, as in Harsanyi and Selten (1988), allow the conclusion that only the highcost firm will choose to wait. Hence, the low cost firm will emerge as the endogenous price leader.