Differential Pricing Research Articles

Drug pricing models, no 'one-size-fits-all' approach: a systematic review and critical evaluation of pricing models in an evolving pharmaceutical landscape.

Access to new medicines is crucial for patients but increasingly sparks discussion due to high prices. Simultaneously, the growing emphasis on specialized products and uncertainty surrounding the long-term effectiveness of new drug classes brought to the market underscore the need for innovative pricing approaches. A systematic literature review of pharmaceutical pricing models, accompanied by a critical appraisal, was conducted to offer insights contributing to novel approaches balancing sustainable pharmaceutical innovation with affordability and accessibility for patients. Six different pricing models are identified: value based pricing, basic cost-based pricing, and four more comprehensive pricing models incorporating numerous elements: the cancer-drug-pricing model, AIM model, (Nuijtens) discounted cash flow, and the real-option rate of return method. Although there are many similarities among the models, each has unique assumptions for implementation. For instance, all models except for the standard incremental cost-effectiveness ratio and basic cost-based pricing consider the number of eligible patients and the remaining patent period. Only the AIM model and the Nuijtens discounted cash flow model use lump sums. Both the latter and the real-option rate of return method explicitly include the cost of capital as a major cost-based component. Recognizing the diverse applications of each model highlights the need for more differential and dynamic pricing tailored to the characteristics and therapeutic areas of each drug. Additionally, the study underscores the importance of cost transparency in achieving this goal. Consequently, these findings can help stakeholders develop sustainable and affordable drug pricing mechanisms that address the complexities of the ever-changing pharmaceutical landscape.

Commercial Inpatient Hospital Price Growth Driven by System Affiliation and Non-Profit Status Hospitals

Abstract As policymakers continue to grapple with rising health care costs and prices, understanding trends and variations in inpatient prices among hospital characteristics is an important benchmark to allow policymakers to craft targeted policies. In this study, we provide descriptive trends on variation of inpatient prices paid by commercial health plans stratified by hospital characteristics using data from Health Care Cost Institute’s employer-sponsored insured claims data. Our analyses found evidence of considerable variation among inpatient price levels and growth among system affiliation and profitability. Prices among system-affiliated hospitals grew from $14,281.74 in 2012 to $20,731.95 in 2021, corresponding to a 45.2% increase during this period. On the other hand, prices among independent hospitals grew slower from $13,460.50 in 2012 to $18,196.90 in 2021, corresponding to a 35.2% increase. We do not observe a similar trend in growth rates among case mix index by hospital characteristics, implying that differential inpatient price growth is not driven by changes in case mix by hospital characteristics. Heterogeneity in hospital prices and price growth by type of hospital suggests that public and private policymakers aiming to rein in health spending should consider policies that address this variation.

Demand Response Potential of an Educational Building Heated by a Hybrid Ground Source Heat Pump System

Demand response (DR) enhances building energy flexibility, but its application in hybrid heating systems with dynamic pricings remains underexplored. This study applied DR via heating setpoint adjustments based on dynamic electricity and district heating (DH) prices to a building heated by a hybrid ground source heat pump (GSHP) system coupled to a DH network. A cost-effective control was implemented to optimize the usage of GSHP and DH with power limitations. Additionally, four DR control algorithms, including two single-price algorithms based on electricity and DH prices and two dual-price algorithms using minimum heating price and price signal summation methods, were tested for space heating under different marginal values. The impact of DR on ventilation heating was also evaluated. The results showed that applying the proposed DR algorithms to space heating improved electricity and DH flexibilities without compromising indoor comfort. A higher marginal value reduced the energy flexibility but increased cost savings. The dual price DR control algorithm using the price signal summation method achieved the highest cost savings. When combined with a cost-effective control strategy and power limitations, it reduced annual energy costs by up to 10.8%. However, applying the same DR to both space and ventilation heating reduced cost savings and significantly increased discomfort time.

Channel structures of third-party platforms

The growing prominence of third-party (3P) platforms in the online retail sector has made the selection of an appropriate channel structure strategy a critical concern for manufacturers, 3P platforms, and retailers operating within this environment. We construct a Stackelberg game model with the manufacturer as the leader, evaluating four channel structures: (A) reselling and retailer agency selling, (B) agency selling and retailer agency selling, (C) reselling and agency selling, and (D) reselling, agency selling, and retailer agency selling. The supply chain can adopt two pricing strategies: uniform pricing (UP) and differential pricing (DP). Research indicates that expanding the number of channels may not always enhance profitability for suppliers and supply chain participants. Under strategy UP, the 3P platform opts for structure B, whereas the retailer favors structure C. Incorporating agency selling is advantageous for the manufacturer; however, structure A represents the least beneficial option for the supply chain. Under strategy DP, a substantial portion of the pareto optimal region is present. Intense competition and reduced agency fees lead both the supply chain as a whole and individual member to prefer structure A. The addition of a reselling or retailer agency channel boosts the manufacturer's profits, and benefits the 3P platform, while structure D emerges as the least favorable option for the retailer. Furthermore, under strategy DP, structure C is rendered obsolete, signifying the retailer's essential role in the supply chain to the advantage of all involved parties. Our study advances the scholarly understanding of sales models and platform economies by offering valuable insights into the decision-making processes of manufacturers, third-party (3P) platforms, and retailers regarding channel structure choices in a 3P platform environment.

Reevaluating the Most Favored-Nation Treatment: Addressing Challenges in Modern Trade

As global trade continues to evolve, the foundational principles that govern international commerce are increasingly scrutinized. The Most Favored-Nation (MFN) principle, a cornerstone of the World Trade Organization (WTO), was designed to foster fairness by mandating equal trade concessions for all members, thereby ensuring non-discriminatory trading behaviors. This research paper focused on the challenges of the Most Favored-Nation (MFN) principle within the World Trade Organization (WTO), a clause that mandates equal trade concessions for all members, ensuring non-discrimination. The research question investigates whether the MFN principle effectively promotes fairness in international trade or if it unintentionally exacerbates economic inequalities, particularly for developing countries. Findings reveal that MFN clauses often reduce market competition and lead to higher prices, while also disadvantaging developing countries that struggle to compete with developed nations. The paper underscores the need for MFN principle reform, such as advocating for differential pricing strategies for enhancing economic competition, setting exceptions for the poorest countries to implement tailored trade policies, and empowering these nations to challenge unfair practices by richer countries. These reforms aim to create a fairer and more balanced global trade system that supports inclusive economic growth for the whole world.

An Evolutionary Game-Based Regulatory Path for Algorithmic Price Discrimination in E-Commerce Platforms

With the advent of big data, the swift advancement of diverse algorithmic technologies has enhanced the transaction efficiency of the e-commerce business. Nevertheless, it is crucial to acknowledge that e-commerce platforms might employ algorithmic technology to enforce differential pricing for various consumers with the aim of maximizing profits, thus infringing upon the lawful rights and interests of consumers. This paper focuses on the algorithmic price discrimination commonly observed on e-commerce platforms. To effectively regulate this behavior, the paper utilizes evolutionary game theory (EGT) to analyze the strategies employed by e-commerce platforms, consumers, and market regulators to achieve stability. This research employs a real-life situation and utilizes parametric simulation to visualize and analyze the process and outcomes of the three-party evolutionary game. The results demonstrate the credibility and feasibility of the article’s findings. Based on our research, we have reached the following findings: During the process of evolution, the strategic decisions made by the game participants from the three parties will mutually impact each other, and various elements exert varying degrees of influence on the strategic choices made by the game participants from each party. Collaborative governance can enable consumers and market regulators to regulate the discriminatory pricing behavior of e-commerce platforms effectively. This article offers valuable insights into the governance of violations in the e-commerce sector based on robust data and model research.

Competitive Advantage as Mediating Role to Enhance MSMES Performance

Small and Medium Enterprises (SMEs) play an important role in improving a country’s economy. However, only SMEs with a competitive advantage can win the market competition and improve SMEs’ performance. This study aims to analyze the role of knowledge management and supply chain management in improving company performance through the influence of competitive advantage. The research method used in this research is quantitative with a causal approach. The population in this study was conducted on SMEs in Palu City. Purposive sampling was used to collect 100 samples from small and medium enterprises. Data analysis was performed using Structural Equation Modeling (SEM). The research results partially and simultaneously show that Knowledge management has a significant effect on competitive advantage; knowledge management has a significant effect on company performance. Supply chain management has a significant effect on company performance. Competitive advantage has a significant effect on company performance, and also, Competitive advantage mediates the effect of knowledge management on company performance. However, supply chain management has no significant effect on competitive advantage, and Competitive advantage does not mediate the effect of supply chain management on company performance. the importance of knowledge management in achieving competitive advantage from SMEs is important. Increased competitive advantage occurs from two factors, namely product differentiation strategies and pricing, which can increase the competitive advantage of competitors and increase SMEs’ profitability.

Product differentiation, quality, and milk price stability: The case of the Swiss cheese market

AbstractWe investigate potential linkages between product and quality differentiation in the cheese markets and raw milk producer prices. We analyze the co‐movements of producer prices of milk delivered to cheese processing channels with different differentiation strategies, namely industrial, artisanal, and artisanal cheese with geographical indications (GI) in the Swiss dairy market. We find that overall, product and quality differentiation in cheese markets helps milk producers achieve higher and more stable prices. Additional GI protection does not guarantee further enhancement of producer prices. Rather, its effectiveness may depend largely on the strength of GI protection and the governance of producer organizations.

The impact of differential pricing subject on consumer behavior

The escalating use of artificial intelligence in marketing significantly impacts all aspects of consumer life. This research, grounded in attribution theory and S–O-R theory, employs scenario-based experimental methods to simulate two distinct purchasing contexts. The aim is to investigate consumers' psychological and behavioral responses to AI-initiated pricing. Through SPSS analysis of variance and Bootstrap analysis, the mechanisms of influence of AI-initiated pricing on consumer behavior are tested, revealing the mediating variables of mind perception and consumer perceived ethicality, as well as the mediating variables of perceived enterprise control. Data were collected from Chinese customers to test the model of this study. A total of 841 valid questionnaires were analyzed using ANOVA and Bootstrap analysis with SPSS. The results show that: (1) Consumers exhibit higher repurchase and word-of-mouth recommendation behaviors and lower complaint and switching behaviors for AI-initiated pricing compared to marketers; (2) AI-initiated pricing leads to diminished mind perceptions and augmented ethical perceptions among consumers. Ethical perceptions serve as a complete mediator, while mind perceptions play a less significant mediating role; (3) Perceived enterprise control plays a moderating role in the impact of AI-initiated pricing on consumer behavior. That is, when consumers know that the enterprise can control pricing agents, AI-initiated pricing leads to lower repurchase and word-of-mouth recommendation behaviors, and higher instances of complaining and switching behaviors than humans.

Differential Pricing Strategies for Airport Shuttles: A Study of Shanghai Based on Customized Bus Ticketing Data

Airport shuttle buses, as a specialized form of bus service, serve as an economical, efficient, and sustainable transportation option for air travelers. In contrast to conventional bus services, airport shuttle bus operations exhibit more pronounced market-oriented characteristics, striving to balance extensive public transport coverage with the optimization of corporate profitability. Although these services outperform regular bus transit in terms of efficiency, they incur higher operational costs. However, existing studies on enhancing profitability and optimizing resource allocation for airport shuttle buses are inadequate. This study proposes a differential pricing strategy based on historical ticketing data. Initially, we analyze the characteristics of orders, users, and reservations within the context of customized bus operations. Leveraging the differences among various groups, we employ clustering techniques to classify seat grades and segment users. Based on the clustering outcomes, we determine distinct price elasticity values for each segment. As the strategies are developed based on seat grades, booking time, and user travel patterns, the numerical experiments indicate that the proposed differentiated pricing strategy can increase the revenue of customized public transport services by at least 41%. This strategy not only enhances the efficiency of resource allocation and service accessibility but also makes the service more financially sustainable.

Ethics of dynamic and differential pricing for cosmetic procedures

Patient demand for procedures has increased in the evolving landscape of cosmetic dermatology. This has been fueled, in part, by social media and the growing normalization of cosmetic enhancements, developments that have led some patients to have potentially unrealistic expectations and place undue pressure on dermatologists to meet these often unrealistic demands. This pressure is exacerbated further by patients who are seen as difficult, demanding, and time-consuming and who may require extensive counseling. Physicians may adopt dynamic or differential pricing strategies to offset the additional time and effort that these patients require. We discuss the ethical concerns surrounding these pricing strategies in the cosmetic sphere, highlight the importance of transparency in pricing, and offer suggestions to promote clarity and fairness in cosmetic dermatology practices.

Quality differentiation and optimal pricing strategy in multi-sided markets

This paper analyzes the generalized quality differentiation model in multi-sided markets with positive externalities, which leads to new insights into the optimal pricing structure of the firm. We find that quality differentiation for buyers affects not only the side involving differentiation but also the other side due to cross-side network externalities, thereby affecting the pricing structure of multi-sided firms. In addition, quality differentiation affects the strategic relationships among all the choice variables for the platform, enabling the platform to strategically use quality differentiation to increase its profits.

The Influence Of Product Differentiation And Price Discounts On Purchasing Decisions At PT. Hindo Medan

This study aims to determine and analyze the effect of product differentiation and price discounts on purchasing decisions at PT Hindo Medan. There are still people who think that this store is quite expensive for the price of each product. The product differentiation found in the company is considered to be less effective with other companies and does not have a significant difference. Price Discounts provided are still relatively low compared to discounts from other competing products and consumers cannot decide to shop at this store. This study uses quantitative data types and multiple regression analysis to obtain answers to the research hypothesis, the sample size is 71 respondents, with the sampling technique being a saturated sample. The results of the t test analysis show that there is an effect of product differentiation on purchasing decisions at PT. Hindo Medan can be seen from tcount> ttabel (2.384> 1.667) with a significance of 0.000 <0.05. Price Discount on Purchasing Decisions at PT Hindo Medan can be seen from tcount> ttabel (3,865>1,667) with a significance of 0.001 <0.05 F test together between the Effect of Product Differentiation and Price Discount on Purchasing Decisions at PT Hindo Medan. obtained the value of Fcount> Ftabel (13.365> 3.13) which shows simultaneously the Effect of Product Differentiation and Price Discount on Purchasing Decisions at PT. Hindo Medan It can be seen from the R-square result of 0.282 or 28.2% which indicates that around 28.2 Purchasing Decision variables (Y) can be explained by the Product Differentiation variables (X1 ) and Price Discount (X ).2

Flooding and Elevation: An Examination of Differential Price Responses to Flood Events

Although many studies show elevating properties in flood-prone areas can be cost effective, few, if any, studies have examined the impact of home elevation on property values. We examine the impact of multiple flood events on property values of elevated and non-elevated homes in Charleston, SC. We find flooding significantly reduces the rate of appreciation, and home elevation increases the rate of lost appreciation. Our results suggest home elevation is not a flood risk adaptation and mitigation strategy valued by the market.

Analysis of Feasible Pathway of Marinefishing Net Recycling of China-Case Study of Sanya City,Hainan Province

As single-use plastics, abandoned fishing nets cause pollution and damage to the ocean and biodiversity. This is a hot topic in international environmental and plastic governance. Fishing net materials are mainly composed of thermoplastics, including polyamide (nylon, PA) , polyethylene terephthalate (PET) and polypropylene (PP) . The real solution to pollution is to bring back waste fishing nets for recycling and use them in high-value recycled products. The research team conducted on-site research in Sanya City in April 2023. The survey found that the main fishing gear used by fishermen in Sanya is gillnets. Due to reasons such as low recycling value and high salvage costs, the local area has not yet formed a closed-loop industrial chain for waste net high-value recycling. The survey also found that Sanya fishermen have a positive attitude towards increasing fishing net recycling, but their actual actions are also restricted by factors such as the price of fishing net recycling and the convenience of recycling. Based on the survey results of this fishing net recycling, the research team provides four feasible suggestions for high-value utilization of fishing net recycling and regeneration. The first is to introduce upstream and downstream enterprises and terminal brand enterprises to regenerate fishing nets to produce high-value recycled products, thereby increasing the initial recycling price of fishing nets. The second is to establish a “centralized recycling demonstration site” to improve the efficiency of fishing net recycling through differential price subsidy recycling models. The third is to establish the traceability of fishing net recycling and the quantitative evaluation system of recycled carbon emission reduction to give full play to the commercial value and carbon market value of recycled fishing nets. The fourth is to strengthen the publicity of the environmental benefits of fishing net recycling and promote community environmental sustainability through capacity building and training. Continuous development.

Gateway community stakeholders’ perceived impacts of protected area management actions: The case of North Carolina (U.S.) state parks

Many protected area managers contend with increasing demand and insufficient funding (e.g., overcrowding, overuse, maintenance shortfalls, and staffing shortages). To combat these challenges, managers are exploring management actions (i.e., differential pricing, amenity pricing, reservation systems, and demand-based pricing) to increase revenue and distribute or reduce visitor use during peak times. However, implementation of these management actions may displace visitors, affecting gateway community stakeholders (e.g., park staff, affiliated nonprofits, tourism operators, destination management/marketing organizations (DMO), and elected officials) who benefit from state parks. Therefore, it is crucial to understand the effects these actions may have on gateway community stakeholders. Utilizing Weber's theory of formal and substantive rationality (WTFSR) coupled with the triple bottom line (economic, environmental, and social impacts), we conducted a concurrent, nested mixed methods study with 25 gateway community stakeholders of North Carolina State Parks (NCSP). Analysis of 25 semi-structured interviews and embedded rating and ranking questions provided a deeper understanding of stakeholders' preferred management actions, motivations for those preferences, and perceived impacts of NCSP management actions. Apart from demand-based pricing, gateway community stakeholders expressed overall positive economic, environmental, and social sentiments towards the proposed management actions, suggesting a suite of actions may be ideal for increasing revenue and distributing or reducing visitor use during peak times in protected areas. Management implications•Gateway community stakeholders can effectively differentiate between suites of management options to enhance environmental protections, community benefits, and profits.•State resident discounts, amenity pricing, and reservation systems were all highly ranked across multiple stakeholder groups, suggesting NCSP has multiple options to increase revenue and distribute or reduce visitor use during peak times. However, demand-based pricing had limited support from stakeholders suggesting NCSP should prioritize other management actions. The varying levels of support for management actions makes it crucial for NCSP to communicate their management action decisions with stakeholders.•Protected area managers must sustain relationships with gateway community stakeholders to be able to understand stakeholders' perspectives on the impacts of management actions.•Beyond NC, this study provides a strategy for protected areas facing similar challenges to assess how management actions may impact gateway community stakeholders or other key stakeholders (e.g., park users, underserved communities).

The strategy of differential pricing and network utilization: evidence from India’s telecommunications sector

PurposeThe network capacity deployed to manage the busy hour (or peak-hour) traffic remains underused during the nonbusy (off-peak) hours. Transferring some traffic from peak-hour to off-peak hours is likely to improve the utilization of network resources during the off-peak hours. This paper aims to examine whether diverting traffic from peak-hour to off-peak hours is possible by adopting the differential pricing policy.Design/methodology/approachThe peak-load pricing theory suggests that the policy of differential pricing is socially optimal when there is peak demand for a particular duration and then there is off-peak demand. In this study, hourly traffic data from both peak and off-peak periods were collected from the Indian telecom service provider, “Aircel.” The paper analyzed the disparity in traffic between peak and off-peak hours using the nonparametric Tukey’s test. An experiment was also conducted to analyze whether a significant shift in telecom traffic occurs from the peak to the off-peak period when a price discount is applied during the off-peak period.FindingsStatistically significant differences were observed in network traffic between peak-hour and off-peak hours. The network utilization of the telecom service provider Aircel was notably lower, particularly during the off-peak hours. The experiment demonstrated a high degree of price sensitivity among telecom service subscribers. Telecom Regulatory Authority of India (TRAI) has not considered network utilization of telecom service providers as a key performance indicator. Based on the outcomes of the study, this paper recommends that TRAI should adopt a more proactive approach by encouraging telecom service providers to follow the policy of differential pricing to enhance utilization of their network capacity.Originality/valueTo the best of the authors’ knowledge, this is the first paper to explore the issue of pricing as a tool for bringing about more uniform movement of telecom traffic, thereby enhancing network utilization within India’s telecommunications sector.

Household water price and income elasticities under increasing-block pricing policy in China: an estimation using nationwide large-scale survey data

Figuring out household water demand response is of importance to sustainable water pricing policy making and optimalization. The paper estimates price and income elasticities of residential water demand in China by using the unique dataset from Chinese Household Water Use Behavior Survey 2019 in 50 cities. Two instrumental variables of marginal water price and average water price are used to address the endogeneity in the context of increasing-block water pricing policy. Results show that price elasticity ranges from −0.170 to −0.543, meaning that the demand for water is inelastic. Income elasticity ranges from 0.062 to 0.133, indicating that water is a necessary commodity. It unveils that water scarcity cities have more sensitive price response. It verifies the effectiveness of the differential increasing-block water pricing schemes tailor-made to local water resources endowments. Besides, it shows that high water-consuming households have more sensitive price response. It suggests that implementing more stringent IBWP scheme for those households constitutes a promising policy improvement option in the future.

Power (re)distribution: How dominant capital regained control of the Energiewende

The Energiewende (energy transition) is the dynamic and contested project of energy transition in Germany. It encompasses both the sociotechnical transformation of the German electricity system and the reorganization of the sector’s ownership structure. In this paper, we present a Capital-as-Power (CasP) based analysis, investigating industrial path-dependency and innovation as part of the dialectics of power and sociotechnical change in capitalism. According to CasP, dominant capital seeks to increase its differential accumulation, i.e., accumulation relative to a benchmark. Energiewende policies initially decreased the differential accumulation of dominant electricity firms in Germany. However, we find that by concentrating their control over the shrinking conventional generation capacity, while variable generation expanded, dominant firms gained the leverage needed to increase differential prices and profits, thus managing to regain sectoral control by increasing their threat to reliable power supply. We find that these processes coincide with spatial centralization, ownership concentration, and decreasing penetration rates of renewable energy resources in Germany. By presenting new conceptual tools and empirical findings, we trace the ways in which the recovery of dominant capital in the German electricity sector shapes and restricts energy transition processes.

Statistical Properties of the Department of Commerce’s Antidumping Duty Calculation Method with Implications for Current Trade Cases

The Department of Commerce (DOC) uses differential pricing analysis in order to detect whether a foreign exporter dumps goods in the U.S. market at prices lower than the exporter sells the goods for in its domestic market. A dumping duty is then levied on the exporter, the amount of which depends on the dumping margin. Several recent cases at the Federal Circuit Court of Appeals have challenged the DOC’s methodology on statistical grounds. In this article, the DOC’s procedure for calculating the dumping margin is described in detail, including the rules for the controversial zeroing policy. Several statistical issues with the DOC’s approach are identified and some potential improvements are proposed.