Microeconomic influences on operating leverage

The concept of operating leverage generally has been visualized in the context of linear break-even analysis. This paper evaluates the properties of two measures of the degree of operating leverage using a more general short-run microeconomic model of the firm. In this model, the degree of operating leverage is related positively to the price elasticity of demand for a firm's output, to its elasticity of supply for an input, and to its output elasticity. In addition, operating leverage measures are usually derived from models inconsistent with firm wealth maximizing behavior and are too simplistiic for complex models with stochastic demand, supply, and production functions.     

Determinants of retail sales in SMSAs

This paper develops a theoretical model to explain consumer behavior in the context of spatially extensive retail markets. Several socio-economic variables influencing total and per capita retail sales are identified and their effects on sales are predicted. The theoretical framework presented in this paper serves to link location theoretic arguments to the retail trade arena and to provide a guideline for the empirical work reported. The empirical work encompasses nine retail trade sectors plus retailing in the aggregate. Good results are obtained for total sales and credible results for per capita sales using data from 229 United States SMSAs.     

Manufacturer-Optimal Wholesale Pricing When Retailers Compete

The existing marketing science literature on channels of distribution has emphasized pricing strategies that maximize either channel or manufacturer margin. This emphasis has implicitly assumed that optimal wholesale prices are independent of any fixed fees charged by the manufacturer. While this assumption is justified in a single-manufacturer, single-retailer world, it generally does not lead to manufacturer profit maximization in a world of competing retailers. In this paper we derive a manufacturer-optimal wholesale pricing strategy by simultaneously determining both elements of a two-part tariff (consisting of a wholesale price and a fixed fee). We show that the manufacturer will always prefer this sophisticated pricing strategy to one that maximizes either channel or manufacturer margin. We also show that both elements of the optimal tariff are functions of the absolute difference between retailer fixed costs.