Tradability, productivity, and international economic integration

This paper develops a model of endogenously tradable goods to study the implications of international integration for price dispersion and pricing to market. A distinctive feature of the model is heterogeneity in both trade costs and productivity. The model highlights the role of heterogeneity in shaping how new entrants at the extensive margin differ from incumbent traders, thereby giving extensive margin movements distinctive implications relative to the intensive margin. In particular, the model predicts that international integration mainly along the extensive margin should be associated with a more limited degree of price convergence. This prediction finds support in cross-sectional regressions on European data and offers insight into recent integration episodes.     

Make pricing power a strategic priority for your business

In the face of rising business complexity and competitive pressure, many firms succumb to price pressures and enter pricing wars. Others focus on creating, quantifying, and capturing pricing power from their market. Since 2011, with help from Warren Buffet and Jim Cramer, Wall Street financial analysts have begun paying close attention to firms with great pricing power. But what is pricing power? How do firms know whether they have it? And how does it affect profit? This research, based on a survey of 128 organizations, identifies and validates the drivers of pricing power and its impact on firm performance. In this article, I create and validate a pricing power assessment instrument that firms can use to get started. This article offers practical recommendations for go-to-market functions on how to start the pricing power discussion, how to measure it, and how to operationalize it.     

Emerging trends in retail pricing practice: implications for research

This article represents the first of several editorials to appear in the Journal of Retailing designed to examine the nexus between retail practice and research, with the goal of stimulating further research. This essay on emerging trends in pricing discusses recent advances in retail pricing optimization. We begin with a review of how retailers typically make pricing decisions using time-honored heuristics and attempt to infer the optimal decisions. However, current methods are suboptimal because they do not consider the affects of advertising, competition, substitute products, or complementary products on sales. Most fail to take into account how price elasticity changes over time, particularly for fashion merchandise, or how market segments react differentially to price changes. In addition, many retailers find it difficult to know how to price merchandise when their suppliers offer temporary “deals.” They are also generally unaware of how their pricing strategy influences their overall image. As these issues demonstrate, optimal pricing is not a static problem. Retailers must be able to react quickly to changes in the environment or sales patterns. This paper also provides examples of the more sophisticated pricing techniques that are currently being tested in practice. Finally, we conclude with a discussion of the critical components that must be incorporated into retail pricing.     

Effectiveness of some simple pricing strategies under varying expectations of competitor behavior

A firm needs to tailor its pricing strategy to the particular competitive setting it faces. We show how a firm can select a pricing strategy that yields higher expected profit than other simple pricing strategies for the competitive conditions encountered. We show that no one strategy yields the highest expected profit for all competitive settings. In particular, we find that a more aggressive pricing strategy is needed for those markets that are either very cooperative or very competitive, while a more cooperative pricing strategy is preferred for markets which have a moderate degree of competition. We also find that a more aggressive pricing strategy is needed as the number of competitors increases. Our results suggest how to choose the pricing strategy that yields the highest expected profit given the likely behavior of a firm's competitors.The authors thank Terry Elrod and Robert Lusch for their comments on earlier versions of this paper.     

A taxonomy of information technology-enhanced pricing strategies

As a result of evolving technology, opportunities for innovative pricing strategies continuously emerge. The authors provide an updated taxonomy to show how such emerging strategies relate to recent technological advances. Specifically, they cite increased availability of information, enhanced reach, and expanded interactivity as three technological advancements and identify six pricing strategies enhanced by these factors. They also discuss the role of utility, prospect, range, and signaling theories for emerging pricing strategies, along with several applications and managerial implications.     

The six pricing myths that kill profits

Pricing is the most important driver of profits. Pricing is also, surprisingly, the area most executives overlook when implementing initiatives to increase profits. There is a reason: Research presented in this article suggests that most executives implicitly hold on to a series of weakly held assumptions about pricing that ultimately are self-defeating. These pricing myths are that (1) costs are the basis for price setting, (2) small price changes have little impact on profits, (3) customers are highly price sensitive, (4) products are difficult to differentiate, (5) high market share leads to high profits, and (6) managing price means changing prices. This research shows how executives can overcome these misconceptions and thus implement sustainable profit improvements via pricing.     

Optimal pricing in social networks considering reference price effect

We study the optimal monopoly pricing strategies in a social network, in which consumers experience a network effect that is dependent on their neighbors' consumptions and a reference price which is the average price received by their neighbors. We establish a two-stage game model for any social network. Utilizing the backward induction, we derive the equilibrium price by maximizing the monopolist's profit. In addition, we apply this model to the two most commonly used network structures: the star network and the bipartite network. We find that both the network effect and the reference price effect play a critical role in deciding pricing strategies in social networks. Moreover, our numerical results demonstrate that whether to implement discriminatory pricing depends critically on the network structure. This work provides monopoly firms a useful guideline for optimal pricing decisions in social network marketing.     

Standards and export decisions: Firm-level evidence from developing countries

Standards and technical regulations set in importing countries have become a rising concern to exporters, especially to those in developing countries. This paper examines the importance of various types of standards in developing-country firms' export decisions. Drawn from the World Bank Technical Barriers to Trade (TBT) Survey database, we find that different types of standards exhibit sharply distinct relations with firms' intensive and extensive margins of exports. Quality standards are positively correlated not only with firms' average export volume across markets and products but also their export scope, measured by the number of export markets and products. A similar relationship is found between labeling requirements and export scope. Certification procedures, however, are associated with a significant decline in the number of export markets and export products. Our results suggest that different approaches should be taken to address each type of technical regulations. Not all standards need to be negotiated away to boost trade, but negotiations on certification procedures with the aim of reaching Mutual Recognition Agreements (MRAs) can help firms improve economies of scale and scope.     

Achieving low-cost UMTS networks via pricing

One of the main concerns of mobile operators towards deployment of Universal Mobile Telecommunications System (UMTS) networks is the investment cost. The costly radio access network, based on the network equipment required in a service area, prevents incumbents and new entrants from upgrading or building a new UMTS network. In this article, a novel, low-cost approach to the UMTS radio access network design is proposed. The approach employs the use of pricing incentives. This approach is based on the assumption that a pricing mechanism is in place to control excessive traffic load during peak periods. By incorporating this assumption into the network design, the network designer is able to relax certain design parameters, which may contribute to significant savings in equipment cost. Investigation is focused on the UMTS coverage and capacity planning, using the Net Present Value (NPV) financial analysis. For certain price-sensitivity levels, the analysis indicates that this approach provides a suitable strategy for mobile operators to comfortably move forward with UMTS upgrade and gain competitive edge in the wireless market.     

Transfer pricing for aligning divisional and corporate decisions

Discussions about transfer pricing normally presume the firm's objective is to maximize profit while making the best use of existing capacity. This article differs by exploring the impact of transfer pricing on capital budget decisions. In decentralized firms, decision authority for investment is assigned to division managers whose capital budgets include revenues from internal transfers. When a selling division is under capacity, economic theory recommends a transfer price based on differential cost. Here the seller generates sufficient revenues to recoup operating costs, but not enough to recover capital costs. Consequently, division managers will reject some investments that otherwise would have increased corporate shareholder value. Market-based transfer pricing overcomes this conflict by allocating savings on inter-company transactions to the selling division. However, market transfer pricing may result in shortfalls to corporate profit. Nonetheless, we argue in favor of the use of transfer pricing on the presumption that long-term value creation takes precedence over short-term profit.     

Effects of pricing and promotion on consumer perceptions: it depends on how you frame it

This research examined the extent to which different promotional frames increased perceptions of deal value. Price discounts dominate the sales promotions employed by marketers. The framing literature suggests discounts have robust positive effects on consumer perceptions of deal value. However, the current research showed that negative quality inferences moderated discount framing effects and undermined deal value, particularly when no assurance of product quality was provided. Every-day-low-price offers were also vulnerable to negative quality inferences, while free gift frames maintained quality perceptions and increased deal value. Product trial acted to further magnify promotional framing effects, according to a confirmation bias. These findings were consistent with an attribute framing mechanism.     

An empirically derived taxonomy of retailer pricing and promotion strategies

Most research categorizes grocery retailers as following either an Every Day Low pricing (EDLP) or a High Low (Hi-Lo) pricing strategy at a store or chain level, whereas this paper studies retailer pricing and promotions at a brand-store level. It empirically examines 1,364 brand-store combinations from 17 chains, 212 stores and six categories of consumer package goods in five U.S. markets. Retailer pricing and promotion strategies are found to be based on combinations of four underlying dimensions: relative price, price variation, deal intensity and deal support. At the brand-store level, retailers practice five pricing strategies, labeled Exclusive, Moderately Promotional, Hi-Lo, EDLP, and Aggressive pricing. Surprisingly, the most prevalent pricing strategy is not Hi-Lo pricing strategy as is widely believed. It is one characterized by average relative brand price, low price variation, medium deal intensity, and medium deal support. The findings provide some initial benchmarks and suggest that retailers should closely monitor their competitors’ price decisions at the brand level.     

预售模式下酒店客房定价及最优超售量确定的研究

创新驱动战略下国内服务业的发展取得了长足进步．为服务业提供了完善的预订制度且高效的预订系统,酒店业是一个采用预订系统销售自身产品的典型服务业,其预订流程非常完善。分析了在预售期内带有预订取消现象且预订未取消的旅客随机到达的情况下．构建数学模型就预售期内服务产品的定价及产品最优超售量问题进行了研究。     

Financial factors and exporting decisions

Is financial health a determinant of export market participation? Is it an outcome? Using a panel of 9292 UK manufacturing firms over the period 1993-2003, we explore the links between firms' financial health and their export market participation decisions. We find that exporters exhibit better financial health than non-exporters. Yet, when we differentiate between continuous exporters and starters, we see that this result is driven by the former. Starters generally display low liquidity and high leverage, possibly due to the sunk costs which need to be met to enter export markets. Furthermore, we find no evidence that firms enjoying better ex-ante financial health are more likely to start exporting, and strong evidence that participation in export markets improves firms' financial health.     

Money-back guarantee and pricing decision with retailer's store brand

This paper investigates the money-back guarantee (MBG) choice problem in the presence of store brand introduction in a two-echelon supply chain consisted of one manufacturer and one retailer. Game-theoretic models with different MBG policies regarding the national brand and the store brand are examined. We found that the MBG policy could be a strategic tool to help the retailer developing its store brand even when a fairer policy is chosen by the retailer and the store brand is considered by consumers as a low-end substitute for the national brand. The presence of MBG is beneficial to the retailer while unfavorable to the manufacturer, even though the retailer provides a fairer MBG policy, i.e., MBG for both two brands. Although the national brand has advantages over the store brand, MBG will increase the competition and cause customer shifting from the national brand to store brand and thus bring a profit loss for the manufacturer. Moreover, we have found that the manufacturer could provide coordinate contracts for the retailer to improve its performance with which a win-win outcome could be reached for both the manufacturer and the retailer.     

The effect of multi-purpose shopping on pricing and location strategy for grocery stores

Though it is a well-accepted fact that consumers indulge in multi-purpose shopping, most previous models of store choice assume that grocery shopping trips are single-purpose trips. This paper provides the first empirical analysis of multi-purpose shopping using data on actual shopping trips. A latent class factor analytic logit model is proposed, which provides a representation of the market structure of grocery store competition, while integrating; multi-purpose shopping, retail pricing format and location strategy. We conclude that incorporating multi-purpose shopping trips provides a better understanding of the competitive market structure, and discuss the managerial implications for the selection of marketing strategies.     

住房价值与社区质量——基于城镇住户微观数据的实证研究

本文利用CHNS城镇住户微观数据,通过构建社区居委会层次的周边环境指标,采用“特征价格模型”详细考察了各类社区质量特征对住房价值高低的影响作用及影响机制。结果发现,平均受教育年限、职业多样化等人力资本因素正效应显著,而民族多样化等文化资本对房价或房租具有明显的负效应。与发达国家经验研究相比,用居住一定年限的住户比重和自有房率等指标衡量的社会资本并不总是显著。此外,托幼机构和医院等设施有显著的正效应,相反,网吧及离交通设施较近的住房价值明显较低。我们认为,这与当前我国经济转型和快速城镇化息息相关。文章所得结论对我国政府如何有效地加强和谐社区建设具有重要启示。     

贸易增长的二元边际:一个文献综述

贸易增长的二元边际是对贸易流量的结构性分解,深入剖析二元边际的结构、作用机制和影响因素对理解贸易增长的性质、福利含义以及贸易政策的制定等贸易实践都具有指导意义。本文从以下四个方面归纳和评述已有的研究成果:(1)在对二元边际的概念界定进行整理;(2)总结关于测度二元边际结构的经验研究;(3)二元边际对贸易福利的作用机制;(4)影响二元边际的因素分析。通过对已有文献的总结和评述,指出发现国内研究的不足以及今后研究拓展的方向。     

Price,online coupon,and store service effort decisions under different omnichannel retailing models

This paper explores three omnichannel retailing models—that is, a Buy-Online, Pick-Up In-Store (BOPS) model, a Showroom model, and an Interactive model (a model that combines the characteristics of BOPS and Showroom)—under which the retailer offers coupons online and invests in service efforts offline. For each omnichannel retailing model, three coupon distribution scenarios (i.e. no coupon, coupon with a common value, and coupon with a different value) are discussed to investigate coupon promotion policies and omnichannel operation strategies. Profits in the omnichannel system and under each model are compared by deriving three decision values: price, coupon value, and service effort. The key findings show that the retailer achieves profit improvement when the incremental purchasing reaches a large value. In addition, a great service effort coefficient leads to a high price, service effort, and retailer profit. The service effort and coupon value in the Showroom model are the largest among the three omnichannel models, while its profit is the lowest. Conversely, although the retailer invests less in service effort, and the price and coupon value are not too large in the BOPS model, the retailer still gains the highest profit. Additionally, in the BOPS model, it is profitable for the retailer to distinguish the coupon value for the online-only and BOPS channels when consumers are less sensitive to the online-only channel’s coupon. However, in the Interactive model, the retailer derives increasing profit by providing coupons with a common value for the online-only and BOPS channels.     

Trade and trade policy with differentiated products: A Chamberlinian – Ricardian model. A comment

Abstract

This paper shows that the results of Venables (1987 Venables, A. 1987. Trade and trade policy with differentiated products: a Chamberlinian – Ricardian model. The Economic Journal, 97: 700–717. [Crossref], [Web of Science ®] , [Google Scholar]) depend critically on the assumption that there are no fixed costs of trade. The introduction of fixed costs of exporting, while making the model more consistent with the empirical evidence, leads to the opposite conclusion that technological progress in one country cannot harm the welfare of its trading partner. However, the results can be obtained in a richer setting with heterogeneous firms.