...extremely high short-term volatility of real exchange rates with the glacial rate (15 percent per year) at which deviations from PPP seem to die out?’ (Rogoff, 1996, p. 664). To solve the PPP puzzle, numerous explanations arose including the core of this essay, Pricing to Market. The objective of this essay is threefold: (i) to explore and review the concept of Pricing to Market (PTM), (ii) to illustrate the implications of PTM for Purchasing Power Parity, and (iii) to analyse the empirical evidence of PTM. Initially, I will start with an overview of the concept of PTM in the first part of this essay, then go on to interpret the implications of PTM for the PPP hypothesis in the following paragraph and cover the empirical evidence concerning Pricing to Market in the last section. Main body Pricing to Market as a concept was first introduced by Krugman in 1987 to characterise the phenomenon of imported goods’ prices staying the same or even increasing when the domestic currency appreciates. In other words, it implies that producers are capable of price discriminating among different international markets (Knetter, 1989). The fact that price discrimination for certain types of goods arise in the international goods markets may be due to the difficulty or absence of international arbitrage. Particularly, differing national standards (for instance, left-hand-drive cars are not sold in the U.K.) or monopolistic firms’ ability may both impede international goods arbitrage (Sarno and...
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...17 22 23 27 30 32 32 34 36 48 49 50 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 Objectives of Pricing Pricing Techniques Categories of Pricing Methods New Product Pricing Policies Product Mix Pricing Strategies Product Line Pricing Five geographical strategies Pricing in Practices Two-Part Tariff with Two Consumers Bundling in Practice Pricing science Pricing of Multiple Products Products with Interrelated/Interdependent Demand Pricing Practices in Market Economy 25 Theories To Get You Started Arbitrage pricing theory Cost-of-production theory of value Multiple-product Pricing Multi-product pricing Conclusion 1 Pricing Practices Pricing practices sometimes seem peculiar. When first-class hotel rooms in London, Tokyo, or Paris go for $300 to $500 per night, Holiday Inns offers Weekend WebSaversSM rates at Chicago’s O’Hare International Airport from as low as $62.48 per night—more than 50 percent off regular prices. Not to be outdone, Howard Johnson’s says vacations are more fun with family package rates up to 70 percent off regular prices. Meanwhile, Marriott offers advance purchase rates on the Internet for as low as $59 per night at the Courtyard Marriott Village at Lake Buena Vista, Florida. At the Hilton Durham, in North Carolina, weekday rates are $109.95 and $89.95 on the weekend. What is going on here? Rather than a mad scramble to build market share at any cost, hotelchain rates represent a shrewd use of information technology. Any night that hotel...
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...Pricing to Market and the Real Exchange Rate Author(s): Hamid Faruqee Reviewed work(s): Source: Staff Papers - International Monetary Fund, Vol. 42, No. 4 (Dec., 1995), pp. 855-881 Published by: Palgrave Macmillan Journals on behalf of the International Monetary Fund Stable URL: http://www.jstor.org/stable/3867601 . Accessed: 22/02/2013 10:54 Your use of the JSTOR archive indicates your acceptance of the Terms & Conditions of Use, available at . http://www.jstor.org/page/info/about/policies/terms.jsp . JSTOR is a not-for-profit service that helps scholars, researchers, and students discover, use, and build upon a wide range of content in a trusted digital archive. We use information technology and tools to increase productivity and facilitate new forms of scholarship. For more information about JSTOR, please contact support@jstor.org. . Palgrave Macmillan Journals and International Monetary Fund are collaborating with JSTOR to digitize, preserve and extend access to Staff Papers - International Monetary Fund. http://www.jstor.org This content downloaded on Fri, 22 Feb 2013 10:54:55 AM All use subject to JSTOR Terms and Conditions IMFStaffPapers Vol. 42, No. 4 (December1995) © 1995International Fund Monetary Pricing to Market and the Real Exchange Rate HAMID FARUQEE* Thispaper investigates the consequences of pricing to marketfor exchange ratepass-through and real exchange rate dynamics across differentpatterns of trade. Under two-way, intraindustrytrade-where...
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...NONLINEAR PRICING STRATEGIES AND MARKET CONCENTRATION IN THE AIRLINE INDUSTRY A Dissertation by MANUEL A. HERNANDEZ GARCIA Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY August 2009 Major Subject: Economics UMI Number: 3384249 All rights reserved INFORMATION TO ALL USERS The quality of this reproduction is dependent upon the quality of the copy submitted. In the unlikely event that the author did not send a complete manuscript and there are missing pages, these will be noted. Also, if material had to be removed, a note will indicate the deletion. UMI 3384249 Copyright 2009 by ProQuest LLC. All rights reserved. This edition of the work is protected against unauthorized copying under Title 17, United States Code. ProQuest LLC 789 East Eisenhower Parkway P.O. Box 1346 Ann Arbor, MI 48106-1346 NONLINEAR PRICING STRATEGIES AND MARKET CONCENTRATION IN THE AIRLINE INDUSTRY A Dissertation by MANUEL A. HERNANDEZ GARCIA Submitted to the Office of Graduate Studies of Texas A&M University in partial fulfillment of the requirements for the degree of DOCTOR OF PHILOSOPHY Approved by: Chair of Committee, Steven N. Wiggins Committee Members, Li Gan James Griffin Steven L. Puller Head of Department, Larry Oliver August 2009 Major Subject: Economics iii ABSTRACT Nonlinear Pricing Strategies and Market Concentration in the Airline Industry. (August 2009)...
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...Problem……………………………………………………....................... 3 CHAPTER II: BASIC CONCEPT AND CHARACTERISTIC …………….............................. 4 2.1 Basic Concept of Oligopoly ……………………………………….................................. 4 2.2 Models of Oligopoly Competition ......…………………………….................................. 4 2.2 The Advantages and Disadvantages of Oligopoly Competition ....................................... 5 CHAPTER III: ANALYSIS .......................................................…………….............................. 6 3.1 Oligopoly of Indonesian Cement Industry ….................................................................... 6 3.2 Competition in Indonesian Cement Industry …................................................................ 9 3.3 Pricing Strategy in Oligopoly ......................................................................................... 10 3.4 Government Policy .......................................................................................................... 11 CHAPTER IV: CONCLUSION AND RECOMMENDATION .………….............................. 13 4.1 Conclusion ….................................................................................................................. 13 4.2 Recommendation …........................................................................................................ 13 REFERENCES ………….......................................................................................................... 14 Economic for Business: Oligopoly...
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...very competitive market. The OECD Competition Committee debated oligopolies in 1999. - Extracts. A formal definition of oligopoly is: “...a market structure with a small number of sellers - small enough to require each seller to take into account its rivals’current actions and likely future responses to its actions.” - Recognised interdependence is the hallmark of oligopoly. Kantzenbach and Kruse (1987, 10) offer a more technical definition asserting that an oligopoly exists, "... if the variation of a behavioural parameter by one of a group of competing firms leads to a perceptible change in selling conditions for the other competing firms…, thus causing them...to respond by changing their own market behaviour." If a dominant oligopoly already exists, the merger between two of its members or between an oligopolist and an outsider will lead to the oligopoly becoming even tighter. The tighter the oligopoly is, the more transparent competitive conduct will become and the easier it will be for conscious parallelism to occur. Oligopolies are markets where profit maximising competitors set their strategies by paying close attention to how their rivals are likely to react. In these conditions, firms might differentiate their products, which can benefit some consumers, but at a price. Oligopoly inter-dependence can also foster anti-competitive co-ordination. Competition laws prohibit collusion that raises prices, restricts output or divides markets. But the laws do...
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...Student Name: Professor: Institution Affiliation: Date: Examination of an oligopoly for profit company An oligopoly market setup is where there exist few sellers and producers. Oligopolistic markets exist when firms producing similar products enter into legal or illegal agreements to curtail entrance of other competitors so as have an upper hand to control production and pricing. Emergence of oligopolistic markets has slowly replaced monopolistic one’s due to coming up of similar firms producing and selling similar products. To curtail competition these firms merge or collude with emerging companies to control market prices, making oligopoly the modern day monopoly. Verizon’s Inc cell phone department is no different from the three giant U.S.A based telecommunication companies that is T-mobile, AT&T and Sprint. To dominate the market structure Verizon’ cell phone segment has continued to produce and sell uniquely branded products and packages, for it’s current the sole online seller of the iPhone 4s cell phone. Verizon’s cell phone department uses non-pricing competition to avoid self defeating outcomes when pursuing large scale profits. This method is used by the telecommunications in the U.S.A to remain relevant in the market (Mazzeo, Michael 2012 ). Brand loyalty in oligopolistic markets has a major role player when maintaining a customer base and attracting new customers. Verizon has devised various loyalty products to attract more...
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...Economics for managerial decision making: Market structure Charles Brown Jr ECO/561 October 04, 2010 Frank Kingsland Economics for Managerial Decision Making: Market Structures Basis for the case study Each of the four cycles in this simulation relates specifically to the four market structures — monopoly, oligopoly, imperfect competition, and perfect competition. The learner plays the role of the newly appointed Chief Executive Officer of Quasar. As the CEO, the learner will approve decisions on the pricing of Neutron based on the cost and revenue structures for each market structure that Quasar transitions through. Cycle 1 – 2003 - Monopoly In this cycle, Quasar Computers introduces Neutron, the world's first all-optical portable notebook computer. This cycle is divided into three steps, each of which requires the learner to take a decision that will increase the profits for the firm. Decision points Step 1 - The price at which Neutron should be introduced to the market is ___2550_____? Step 2 - The advertising budget to be allocated and the price for Neutron is ____2,450___? Step 3 - The amount to be invested on internal processes improvements and the price for Neutron is _2200_____? Discussion question In spite of being a price-setter (a company that can set its own price), why would a monopoly player choose to pursue cost reduction and demand stimulation strategies? They would pursue a cost reduction and demand stimulation strategy by...
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...EFFICIENT MARKETS HYPOTHESIS AND OTHER THEORIES OF PRICING IN FINANCIAL MARKETS Name Course Title/Code Instructor’s Name Date Efficient Markets Hypothesis and other theories of pricing in financial markets Efficient market hypothesis (EMH) is a theory that emerged in the 1960s. It states that it is difficult to predict the market since the price has been set and reflect the current market conditions. It is a disputed and controversial theory. The theory is comparable to other theories of pricing in financial markets. Several strengths and shortcomings emerge through comparison with other theories of pricing (Blinder, et al., 2012). EMH states that no stock is a better buy when compared to others. It is the conclusion that leads to random choices. It is a vital tenet of finance theory. The EMH theory has a basis in other finance theories. It follows the classical theory of asset prices. To determine the connection, a situation where stocks are considered based on good deals. According to the EMH theory, these stocks are worth more than their relative prices. The worth of a stock is the present value of the expected dividends. In this regard, an individual will buy stocks at prices that are below this level. In essence, this is buying stocks that are undervalued assets (Kapil, 2011). Classical theory The classical theory follows the belief that the price of a stock is equal to the best estimate of the stock’s value. This equality means that the undervalued stocks are not real...
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...Market Structures Kudler Fine Foods is a local food store that specializes in epicurean food in the San Diego metropolitan area. They specialize in bakery and pastry items, fresh meats, seafood, produce, packaged foods, specialty dairy products, wine and spirits, and much more. In their mission, Kudler Fine Foods vouch that they shop all around the world for their products and they choose only the finest. In addition to their gourmet food, the founder Kathy Kudler who was once a Vice-President of Marketing of a different, liked to cook gourmet meals. She got the idea that the San Diego metropolitan area needed a gourmet food store. She put together a business plan and opened the first Kudler Fine Foods in La Jolla, CA in 1998. Additionally, that store was profitable and she opened her second store by 2000 in Del Mar, then a third one by 2003 in Encinitas. In the following paragraphs, I will apply microeconomic concepts toward the competitive strategies of Kudler Fine Foods that affect its long term profitability. Additionally, I will evaluate Kudler’s competitiveness in the marketplace, including its customers’ views. In this same process, I will identify the market structure that I believe best applies to Kudler Fine Foods, and assess how the market structure positively and negatively affects Kudler’s long-term profitability. How Kudler competes in the marketplace Kudler Finer Foods is one of the only few competitors who offers gourmet foods in Orange County. They compete...
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...Is Amazon really a monopoly? Yuejiao Jiang Johns Hopkins University Carey Business School Business Writing and Research Pratt Professor Moore Many people think all large companies have monopolistic power on their market. A monopoly exists when a specific person or enterprise is the only supplier of a particular commodity. Monopolies are thus characterized by a lack of economic competition to produce the good or service and a lack of viable substitute goods. The truth is not all companies with huge market share are monopolies, among them is Amazon. Companies like Amazon should not be regulated, but the opposite, should be encouraged due to its impact on the development of the whole industry as a catalytic role. Amazon is not a monopoly because it maintains low prices, benefits customers, and is consumer driven. First, according to Matthews (2014), companies that hold huge market share like Amazon should not be considered illegal because they are not raising prices for consumers. Amazon put customer experiences and low prices first. The price of books on Amazon has stayed stable for many years. People may question that Amazon has been raising prices of some books since last year. But, consumers are the ones make their own judgments towards price. If Amazon happens to raise the price of books, consumers still can purchase cheaper books from somewhere else. On this condition, Amazon is not a monopoly. Price is not the only thing that will be taken into consideration when...
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...Question: Evaluate the effectiveness of oligopoly market structure in achieving the market objectives of producers and consumers. (8m) Oligopoly is a market structure with only a few sellers offering similar or identical products. The products produce by the firms in oligopoly market structure may be homogeneous or differentiated. Example of oligopolistic includes commercial airlines, oil, automobiles, steel, computers and cigarettes. The market objective that consumers achieve in oligopoly market structure is consumers enjoy a wide range of products such as soft drink manufacturer similarly produces a range of their products. The quality of products is likely to be high because there is plenty of non-price competition which includes latest features of technology. However, consumers pay higher prices in oligopoly due to limited choices of producers. The available information is not complete for consumers because there is an incentive to keep secrets from each other among producers. Oligopolies are exciting market forms for producers. There is the prospect of above normal profits for those that can survive and perhaps dominate in the cut and thrust of competitive strategies. The big businesses that form oligopolies are able to afford research and development and the latest machines and equipment, and they use these high levels of technology to try to gain market share. Same as the consumers, the producers need to have information about production technologies and availability...
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...to either cut the route or maintain the route. UA is one of ten major airlines operating in the United States. They currently operate 231 domestic and 143 international routes (Destinations). In 2015 they generated revenue of $37,864 million and had operating cost of $31,697 million, down 3% and 11% from the year prior. At the same time UA was able to increase their profits by 118% to $5,167 million (News, 2016). As of Feb 2016, UA currently holds 14.6% of the US market for flights (RITA, 2016). Overall, UA had a very healthy year, profits were up and operating cost were down resulting in a substantial profit. Breaking down the route from Washington DC to San Francisco. It represents .06% of UA’s market share. According to a search on Google flights the route only has two carriers with a combined nine daily flights, UA operates seven and Virgin Airlines two flights daily (Google Flights, n.d.). UA holds a firm grasp of 78% of the route to San Francisco. In the US we have four different types of market structure. These are competitive, monopoly, monopolistic competition and oligopoly. The airline industry falls into the oligopoly...
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...techniques: 1) SWOT analyses – allows to find the dependence of the main problems of the organization with its strengths/weeknesses, find ways of effective usage of strengths to solve business problems, ways of reducing the impacts of weeknesses and external threads. | Opportunities * New Clever culture of alcohol consumption, attracting of new customers * * Market share increasing& Expansion of the market (sharing the first place with Sun InBev Ukraine. * Openning/exploring of new points-of-sale. * Increasing individualization of production (define different segments and satisfy their specific needs) * Successful player on Digital market * New products and competitive advantages | Threats * Not stable external conditions (economics, politics, legislation, social processes) can negatively influence KPIs of the company. * Emerging of new competitors/international branches enter the market. * Inflation * Loosing of consumers/changing in their preferences (Crimea and East regions of Ukraine). | Strengths * High level of popularity (one of the market leaders in beer, soft drinks and kvass); * Company with long history and strong Brands. * Wide range of products; * High level of quality(“zero-LOX”, ISO 9001, ISO 14001, meets international standards, new standards of social security of workers); * Innovative (a new type of processing barley, “Zelo-LOX”). * Modern equipment (newest, manufactured by advanced companies...
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...faster processes, compact components and increased efficiency. The brand of Eaton isn’t well known amongst consumers, however very well known in the manufacturing industry. The functionality of the product is said to be a “high performance and cost effective”. The style of the product’s aesthetics is a modern and contemporary design as shown below. Eaton’s reputation is said to be higher than their competitors as judged by the quality of the products they provide. Safety of the product is well designed with curved down edges and the components inside are well placed in a firm position. The promotional strategy for this product is the technological push for the market. This in turn will draw in demand pull for the best technology available to buyers. Since Eaton is a major firm in the market, it has a relatively high market communication budget hence it has a high form of promotion strategies available to them. This way they can promote their products such as the Panelmate Touch screen easily. The packaging for this product would be appealing, however not as much as a possible consumer product. The customers that order this product already has pre-knowledge of what the product is capable of doing, so does not need. The distribution for this and other Eaton’s products will be a channel of whole sales to firms. This method of delivery and production is called Right on Time; which means it is delivered on demand by the firm. The estimated retail price for this product is around $4800...
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