When does tiered wholesale pricing create an incentive to reduce retail prices?

Wholesale ‘ladder pricing’ involves setting the wholesale price retailers face as a nonlinear (generally increasing) function of price chosen by retailers. This form of wholesale pricing occurred recently in UK Telecoms, and the issue became extensively debated in the law courts. A major concern in deciding the merits of the case lay with the question of whether or not the introduction of tiered wholesale pricing created incentives for retailers to actually reduce their prices. This paper examines the incentive for the case where the wholesale tariff is a non-linear continuous differentiable function. It is shown that so long as the tariff is strictly increasing, convex, and positive only for retail prices greater than the maximum retailer marginal cost, then there is indeed an incentive to reduce price, whatever the actual gradient of the tariff schedule.     

Access prices,unbundling and product variety in European Internet markets

A fundamental policy in European broadband regulation is unbundled access to the local loop of the incumbent telephone company. We present comparative static results that show as the access price decreases, the retail price decreases, the variety of plans offered by Internet service providers increases and the quantity of each variety increases when a threshold condition is met. Using data from 18 European countries from 2006 to 2012, we find empirical support for these results when Internet product variety is measured by variation in download speeds.     

Determinants of U.S. direct investment in the E.E.C.: Revisited

This paper expands upon an earlier work in this Review concerning the specification of a model to identify the determinants of U.S. direct foreign investment (DFI) in the E.E.C. Compared to earlier studies, a longer data series is used, an improved tariff discrimination proxy is employed, and ‘predicted sales’ are estimated and used as the output variable in the empirical work. A variable to capture the effect of the U.S. capital control programs is also included. The findings reaffirm the importance of market size, especially in the plant and equipment equations, as being an important determinant of DFI. Strong support was also found for the growth hypothesis. Consistent statistical support was found for the tariff discrimination hypothesis. In addition, the findings imply that a variable to capture the effects of fluctuating exchange rates should be included in future studies.     

Convergence clustering in the Chinese provinces: New evidence from several macroeconomic indicators

In this paper, the convergence clustering in 31 Chinese provinces regarding several important economic indicators over the period 1952 to 2016 was empirically investigated. Several provincial clusters were identified in the per capita (real) gross domestic product (GDP), consumption–income ratio, retail price, and consumer price inflation rates, using a club convergence and clustering procedure. The empirical findings are as follows. First, it was found that all series of the original data contain a significant nonlinear component. Second, it was observed that there are five significant clusters for the per capita income in China. Third, it was found that there are four significant clusters for the consumption–income ratio. Fourth, it was observed that there are four significant clusters for the retail inflation rates and two significant clusters for the consumer inflation rates in China. These results will enable local and central planners to implement economic growth, savings and price adjustment policies for different groups of provinces.     

Import sensitive products and perverse tariff‐rate quota liberalization

Abstract This paper shows that a Tariff‐Rate‐Quota's (TRQ) minimum access expansion can perversely trigger domestic price increases. Often, TRQs have prohibitive over‐quota tariffs to mimic import quotas in providing minimum market access. In the WTO's Doha Round, it is likely that countries using TRQs will avoid aggressive tariff reductions if they increase the quota portion of TRQs. We show that when the import price lies between the unit cost of production and the price received by domestic upstream firms, an increase in import quota as a share of domestic production may cause an increase in the domestic retail price.     

Price transmission and market integration: vertical and horizontal price linkages for salmon

Relationships between prices are of interest when testing for market integration as well as analyses of supply chains. A feature that has received little attention is that if two supply chains are linked by market integration at some stage, then the whole supply chain will be linked. Furthermore, the leading price in such a system can be in one supply chain and will not be revealed in market integration studies or analysis of a single supply chain. An empirical analysis is provided for the supply chains for salmon which originates in Norway and the United Kingdom and is then sold at retail level in France as smoked salmon. We find a high degree of price transmission in both supply chains, as well as integrated markets.     

STRATEGIC EFFECTS OF THREE‐PART TARIFFS UNDER OLIGOPOLY

The distinct element of a three‐part tariff (3PT), compared with linear pricing (LP) or a two‐part tariff, is its quantity target within which the marginal price is zero. This quantity target instrument enriches the firm's strategy set in dictating the competition to a specific level, even in the absence of a usual price discrimination motive. With general differentiated linear demands, the competitive effect of a 3PT in contrast to LP depends on the degree of substitutability between products: Competition is intensified when two products are more differentiated, yet softened when two products are more substitutable.     

Beer and the Tie: Did Divestiture of Brewer-owned Public Houses Lead to Higher Beer Prices?

In 1989, the United Kingdom Monopolies and Mergers Commission (MMC) recommended measures that eventually led brewers to divest themselves of 14,000 public houses. The MMC claimed that their recommendations would lower retail prices and increase consumer choice. Since that time, however, retail prices have risen. This paper contains an econometric analysis of the transition period. The analysis is based on a model of the relationship between retail price and retail-organisational form that emphasises how exclusive-dealing clauses and strategic factors interact     

Inverse probability weighting to control for censoring in a post hoc analysis of quality-adjusted survival data from a clinical trial of temsirolimus for renal cell carcinoma

Abstract

Objectives: The Belgian third-party payer wishes to set reimbursement tariffs at a level that reflects the costs of orthotic braces. This article aims to calculate production and distribution costs of a prefabricated hard neck and knee brace and to explore whether Belgian tariffs and actual retail prices correspond with estimated costs of these two braces.

Methods: The cost model considered manufacturing costs, general overheads, research and development costs, warehousing costs, profit and distribution margins. Data were gathered from manufacturers, a production site visit, desk research, a decomposition of finished products and stakeholder interviews. The price year was 2007.

Results: The cost model estimated a retail price of €55–€150 for the neck brace, depending on assumptions. The estimated retail price for the neck brace was lower than the reimbursement tariff of €194 and the actual retail price of €241. The estimated retail price of €331–€694 for the knee brace was lower than the actual retail price of €948.

Conclusions: Actual retail prices and reimbursement tariffs for a neck brace and a knee brace exceeded prices based on estimated costs. Therefore, there appears to be scope for reducing tariffs.     

The price of broadband quality: tracking the changing valuation of service characteristics

This paper investigates how retail broadband prices, choice and quality are changing over time. Using a data set containing daily observations of plans offered in Ireland from 2007 to 2013, this paper applies hedonic modelling techniques to observe the changing pricing of service characteristics. Although we find that average nominal prices remain static throughout our sample period, quality of service has risen dramatically over time, particularly with respect to download speed. Some characteristics of broadband plans exhibit broadly stable valuations over time, but the elasticity of price with respect to advertised download speed and the premium on bundled services declined for most types of broadband plans during the sample period. In addition, the retail price premium enjoyed by the incumbent operator fell significantly since 2007.     

Impact of asset price fluctuation on China’s monetary policy: An empirical analysis based on quarterly data, 1994–2006

The strenuous fluctuation in global asset price in recent years has had a profound impact on the economic and social development of every country. An empirical analysis indicates that asset prices (the stock price index and real estate prices) are important endogenous variables affecting the interest rate reaction function of central bank monetary policy. With expected inflation as a given, each one percentage point rise in output gap will cause a 0.79 percentage point reduction in interest rates by the central bank and each one percentage point rise in real estate price will result in a 2.2 percentage point rise in interest rates. The stock price index does have an influence on the trends in monetary policy, but it is less salient than the impact of housing prices. We also show that monetary policy that employs asset price as an endogenous variable increases the central bank’s control in seeking to attain its objectives. Therefore we suggest that the central bank should make asset price fluctuation an endogenous variable and incorporate it into its forward-looking interest rate rule, in order to facilitate the healthy development of China’s markets for real estate, stocks and derivatives, energy and bulk commodities and maintain rapid, smooth, sustainable and harmonious economic development.     

Changes in the International Competitiveness of Australian Manufacturing: 1968 to 1989

Disaggregated data for twenty-seven Australian manufacturing industries are used to examine movements in international price competitiveness relative to each of sixteen major trading partners over the period 1968 to 1989. The changes in price competitiveness are decomposed into elements of exchange rates, tariff rates, profit margins and unit production costs. Great diversity in outcomes is found across both industries and trading partners, with differences in the growth of labour productivity and the cost of materials most closely associated with divergence in outcomes. The results show that domestic manufacturing industries have been able to achieve improved international competitiveness, where they have outperformed comparable industries in Australia's trading partners in terms of labour productivity growth or reductions in the costs of materials.     

Non-tariff measures: What's tariffs got to do with it?

After successive rounds of tariff reductions by GATT/WTO members, non-tariff measures (NTMs) have increasingly become the focal point of multilateral trade negotiations. It remains an open question whether the liberalization in tariff rates has subsequently been weakened or even erased by increases in NTMs. Using a product-level global panel of WTO members over the period 1996–2019, this paper systematically examines the empirical link between various tariff measures and the imposition of NTMs. I find that bound or applied tariff reductions do not correlate much on their own with NTM incidence. The relevant trade policy margin for detecting a tariff–NTM nexus is instead tariff overhangs, the difference between WTO members' bound and applied tariff rates. Countries impose more NTMs when their sectoral applied tariffs are close to their respective bound rates, indicating that small tariff overhangs signal limited legal trade policy flexibility.     

Business Demand for Broadband Access Capacity

Using data garnered from a quarterly survey of U.S. business establishments from 2Q2000 through 1Q2001, the study estimates an aggregate model of business demand for broadband access capacity. The primary goal is to estimate price elasticities for the demand for access capacity conditional on a business establishment having made the decision to adopt some form of broadband access. The primary findings are (1) on average, the demand for broadband access capacity is price inelastic; (2) the sensitivity to price differs substantially across establishments of different sizes with small establishments exhibiting the greatest sensitivity to price; and (3) the estimated elasticities have important implications for public policies designed to extend broadband networks to unserved areas.     

A social clause against discrimination in the labor market

This paper considers the possibility of employing a social clause on international trade to reduce occupational discrimination and wage discrimination in the labor market. A country subject to such a clause is given the choice of reducing discrimination or having to face the imposition of a tariff or quota on its exports. The impact of these two changes on the remunerations of different groups in society is analyzed in a model allowing for a labor surplus. The analysis shows that neither in the case of occupational discrimination nor in the case of wage discrimination is the social clause necessarily an efficient means for reducing discrimination. Very much depends on how different groups are affected, on the relative political weight of these groups, and on the share of exports in total output.     

DEALER PRICING OF CONSUMER CREDIT*

Price discrimination incentives may induce dealers to bear the financial cost of their customers' credit purchases. We focus on how financial market imperfections make it possible to segment the customer population. When borrowing and lending rates differ from each other and from the rate of interest on a durable good purchase, the structure of those rates influences customers' choices to purchase on credit or cash terms, and the scope for dealers' price discrimination. Empirical analysis of a set of installment‐credit, personal‐loan, and regional interest rate data offers considerable support to the assumptions and implications of our theoretical framework.     

The political economy of tariff protection in China: evidence from the WTO accession

We analyze China's tariff rates at WTO accession using a political economy approach. A model drawing on Branstetter and Feenstra ( 2002 ) is used to derive an optimal tariff rate for each industry. The model predicts that a government would set a high tariff rate if an industry is of large state‐owned enterprise (SOE) share, multinational share, or small foreign import share. From the model we reveal the Chinese government's preference towards different interest groups under the binding tariff constraint from the WTO commitments. The estimated structural parameters imply that the political weights on both the SOE profits and consumer income diminish with the economic opening. More important, the government still favours SOEs over consumer income. Our findings are consistent with the special features of China's economy.     

PRICE DISCRIMINATION AT THE LINKS

This paper reports on an econometric analysis of the pricing structures at 46 public access golf courses in the San Francisco area. Comparisons among several attempts to get a generic measure of price discrimination suggest that the standard deviation of the prices charged is the best measure. Using narrowly cast measures of price discrimination, the paper successfully distinguishes among several different types. Measures of price discrimination can be significant regressors, yet the overwhelming majority of existing work excludes such a variable, leading to biased estimates of the other parameters.     

An assessment of mortgage interest inflation measurement bias in the UK

This article recognizes the highly differentiated nature of UK mortgages. Applying hedonic pricing models in the generation of interest quality adjusted indices this study would suggest the need for a 0.24 percentage point increase in the retail price index (RPI) (which, at an average RPI of 3%, represents a measurement error of 9%). Moreover, this study finds that lenders tend to restrain increases in observable initial interest rates, but more than recoup this restraint through quality adjustments. These findings question the practice of removing mortgage interest repayments from macroeconomic inflationary target measures. This indicates the need to recognize the indirect inflationary impact of base rate rises on the price of highly differentiated debt based products.     

An empirical investigation of customer market analysis–a microfoundation for macroeconomics

The slow adjustment and stickiness of output prices is widely regarded as an important determinant of macroeconomic behaviour. Recently, a number of writers have argued that customer market analysis can provide a microfoundation for price stickiness. This paper develops the theory of a firm selling in a customer market and investigates the empirical implications of the theory. The model is shown to imply a particular pattern of behaviour between retail prices and wholesale prices. Data on retail and wholesale prices for the United States, the United Kingdom and Australia at various levels of aggregation is investigated and found to support the predictions of the customer market model. In the conclusion the macroeconomic implications of the empirical conslusions are drawn out.