Differential Pricing Research Articles

Serving two masters – How dual price signals can undermine demand flexibility

Demand-side flexibility is often encouraged via demand response programs, where users are incentivized to adjust their electricity consumption based on price signals in tariffs. The design and implementation of these signals are vital, as they link conditions of the energy system with user behaviour. As a result of energy system separation into stages of generation, many users are required to simultaneously respond to two price signals. While existing research has mainly examined responses to a single signal, this study highlights the complexities when users must react to two signals simultaneously. It presents a case study using two distinct price signals: real-time pricing (RTP) and a demand charge, analysing the implications such dual price signals could have on users. The study reveals the empirical incompatibility of these signals, leading to conflicting user goals. Such interference complicates decision-making for demand flexibility, potentially eroding user trust in retailers and system operators. The study ends with proposing an alternative tariff, resolving the dual price situation, which facilitates user comprehension and decision-making, and thus enhances the potential for demand flexibility.

Win–Win Coordination between RES and DR Aggregators for Mitigating Energy Imbalances under Flexibility Uncertainty

The integration of renewable rnergy sources (RESs) into the power grid involves operational challenges due to the inherent RES energy-production variability. Imbalances between actual power generation and scheduled production can lead to grid instability and revenue loss for RES operators and aggregators. To address this risk, in this paper, we introduce a mutually beneficial bilateral trading scheme between a RES and a DR aggregator to internally offset real-time energy imbalances before resorting to the flexibility market. We consider that the DR aggregator manages the energy demand of users, characterized by uncertainty in their participation in DR events and thus the actual provision of flexibility, subject to their offered monetary incentives. Given that the RES aggregator faces penalties according to dual pricing for positive or negative imbalances, we develop an optimization framework to achieve the required flexibility while addressing the trade-off between maximizing the profit of the RES and DR aggregators and appropriately incentivizing the users. By using appropriate parameterization of the solution, the achievable revenue for the imbalance offsetting can be shared between the RES and the DR aggregators while keeping users satisfied. Our analysis highlights the interdependencies of the demand–production energy imbalance on user characteristics and the RES and DR aggregator profits. Based on our results, we show that a win–win outcome (for the RES and DR aggregators and the users) is possible for a wide range of cases, and we provide guidelines so that such bilateral agreements between RES and DR aggregators could emerge in practical settings.

The impact of tax and price reforms on companies’ prices in a complex cigarette tax system

ABSTRACT This study analyzes how changes in various aspects of excise tax systems, including minimum price laws and differential price tiers for excise taxation jointly rather than independently, influence firms’ pricing decisions. We apply our model to Indonesia, where the tobacco excise tax system is complex, with several excise tax tiers within and across cigarette types. We use a comprehensive database of prices over the past decade for all cigarettes manufactured and sold in Indonesia, obtained from Indonesian Customs. We find that the impact of excise taxes on prices hides important effects of other pricing policies that are typically ignored in research, which either focus on the independent impacts of excise tax or do not distinguish between cigarette types. Specifically, minimum price policies have a larger impact than excise taxes on pricing decisions for machine-made clove cigarettes (kretek), while excise tax changes have a larger effect on prices for machine-made, non-clove (white) cigarettes. For cigarette types and brands that are more likely to feature a relatively more elastic demand (hand-rolled kretek), companies keep prices close to the minimum price. The results imply that a multi-tiered tobacco excise tax system likely generates distortions that limit government policies’ effectiveness in reducing tobacco consumption.

Influencer selection and strategic analysis for live streaming selling

The increasing popularity of live streaming selling on e-commerce platforms, along with the expanding number of influencers. There are currently two primary categories of influencers: the first refers to top influencers who have a large fan base, resulting in increased popularity and bargaining power. The second category comprises regular influencers who have a smaller fan base, resulting in diminished popularity and bargaining power. Furthermore, sellers are required to consider two pricing strategies, namely the differential pricing strategy and the uniform pricing strategy. We develop a game model to analyze the preferences of the seller regarding influencer types and pricing strategies. We discover that the seller's preference for the influencer depends on the influencer profession's average bargaining power and the fixed payment of the top influencers. When both are less than a certain threshold, the seller prefers to cooperate with the top influencer, and the threshold of both increases under the differential pricing strategy. At the same time, the seller's tolerance for the top influencer's fixed payment increases as the top influencer's popularity increases. It is also observed that the implementation of a differential pricing strategy consistently leads to higher profits compared to a uniform pricing strategy. However, considering the social welfare, the seller tends to favor the uniform pricing strategy when the cost coefficient of the influencer exceeds a specific threshold. Our research presents some guidelines for the seller to make strategic decisions on live streaming selling.

The impact of differential pricing on perceived service quality and guest satisfaction: An empirical study of mid-scale hotels in India

The aim of this article is to identify the key factors of differential pricing and its impact on perceived service quality and guest satisfaction. Great attention has been given by researchers to service quality and guest satisfaction in the tourism and hotel industry. This study however examines an integrated model of differential pricing, perceived service quality and guest satisfaction linked to value perception and satisfaction among guests for prices offered at the time of room booking, and the services available during their stay. A self-administered questionnaire was given to guests who stayed in mid-scale hotels and 334 responses were collected randomly. Structural equation modelling was used to examine the data set, a second-generation method that enables simultaneous modelling of a large number of independent and dependent variables. Partial least square SmartPLS 4.0 was used to evaluate the data. The measurement model and the structural model are the two used to examine the data. According to survey results and findings, booking channel and booking volume are significantly related to guest satisfaction. Additionally, the booking channel has a significant relationship with perceived service quality. Maintaining high-quality websites is crucial to attracting visitors and keeping them, eventually leading to more people using travel websites out of loyalty.

Unlocking the advantages of differential pricing: A two‐period model integrating consumer identifiable information and advertising effort

To explore the potential benefits of differentiated pricing compared to uniform pricing within supply chain networks, we constructed a two‐period dynamic pricing model for products in this research. In our scenario, the manufacturer produces the original product during the initial period and introduces a new‐generation product in the subsequent period. Simultaneously, the retailer handles the original product during the initial period and transitions to selling the new‐generation product boosted by advertising efforts in the following period. Our analysis of the proposed models yielded three primary insights. First, the adoption of a differentiated pricing strategy may not universally favor supply chain participants. Second, the implementation of a differentiated pricing approach does not necessarily equate to higher wholesale and retail prices in each period. Finally, to optimize overall profits and attain mutually beneficial outcomes, it is imperative for supply chain stakeholder to share decision‐making information. Furthermore, we offer managerial recommendations based on these findings.

RadheDham Ashram: Business Continuity Post Disruption

This case highlights the challenges faced by the Religious Tourism sector due to sudden disruptions caused by the COVID-19 pandemic. Although the disruptions affected every trade, the unorganized and budget hotels at various religious destinations in India faced an extended impact. The case is about RadheDham Ashram, an affordable stay offering a religious and spiritual experience at Vrindavan, Uttar Pradesh province of North India. Pandit Shiv Kumar Tripathi, the owner of RadheDham Ashram, was concerned about managing its probable receding operations amidst the disruption caused by the COVID-19 pandemic. RadheDham Ashram was a popular destination to stay in because of its affordability and proximity to the famous Sri Krishna Temple. However, things had changed with the COVID-19 pandemic and predicted lockdowns. As a result, the temples were supposed to close, and the influx of tourists at Ashrams would reduce consequently, as pilgrims would avoid the crowded destinations. Tripathi was worried about the occupancy of the Ashram. His concerns ranged from matching the Ashram service capacity with the uncertain demand to managing yield by adopting strategies such as differential pricing, capacity planning or overbooking when the tourist footfall was uncertain. Due to low customer influx and high demand variability, it was a tough time for Tripathi. He had to select the best possible alternative to bridge the gap between service capacity and demand. The selected alternative must ascertain sufficient yield to RadheDham Ashram along with retention of its goodwill and its loyal customers. All these thoughts made him anxious about the business continuity of his RadheDham Ashram in the upcoming days.

PT23 Is It Possible to Estimate the Welfare Economic Loss to Society of Not Having Value-Based Differential Pricing for Multi-Indication Pharmaceuticals: An Empirical Analysis in Denmark, Norway, and Sweden

PT23 Is It Possible to Estimate the Welfare Economic Loss to Society of Not Having Value-Based Differential Pricing for Multi-Indication Pharmaceuticals: An Empirical Analysis in Denmark, Norway, and Sweden

The relative valuation of cash flow and current accruals affected by their extremity

PurposeRecent studies on the securities market’s differential pricing of earnings components have shown that cash flow from operations is more highly valued than total accruals and that moderate cash flow from operations has higher valuation than extreme total accruals. An interesting question that follows is whether these findings hold regarding the differential valuations of cash flow and current accruals. This study aims to extend prior research by addressing this issue in two ways. First, the authors examine the incremental information content of cash flow from operations beyond working capital from operations. Second, the authors assess the effect of extreme working capital from operations on the incremental information content of cash flow from operations. This study aims to extend prior research by addressing this issue in two ways.Design/methodology/approachThis study adopts market-based accounting research to test its hypotheses and to achieve its objectives. Specifically, this study uses statistical associations between accounting data and stock returns to examine the incremental information content (value relevance) of cash flow and working capital from operations and the effect of extreme working capital from operations on the incremental information content of cash flow.FindingsThe results show that cash flow from operations is not more highly valued than current accruals (both being valued equivalently). However, moderate cash flow from operations has higher valuation than extreme current accruals (each is valued differently). Overall, these research findings indicate that cash flow becomes more important for valuation as accruals get “extreme”.Practical implicationsAs accruals are unlikely to persist to be permanent across the years, these results can be interpreted as indicating that cash flow and accruals information are used jointly by investors, with one being more important than the other depending on the relative “extremeness” of each. Therefore, both are of value to the investor and both should be reported.Originality/valueThe paper contributes to the UK research on determining the preferred level of disaggregation of earnings components, i.e. operating cash flow, current accruals and non-current accruals. This would help investors to improve their investment and credit decisions.

Cooperation and investment decisions of one shipping liner to multiple ports under differential pricing

Cooperation between shipping liners and ports has become an inevitable trend in the development of the maritime supply chain. To better understand the investment decisions of one shipping liner for multiple ports and the efforts that ports should make to achieve a large market share and high profitability, we construct a two-stage game model from the perspective of ports and shipping liner and summarize the conditions under which the shipping liner invests in different ports. The results show that the greater the difference in initial capacity between two ports under no-investment, the more likely it is that the shipping liner chooses the High-capacity port to call. Interestingly, investment in ports by the shipping liner may not necessarily help ports expand their market share but may instead damage the market share they already have, and the loss effect is positively related to port size. Additionally, with the shipping liner investment, a stronger discount decided by the Flexible port does not attract the shipping liner to cooperate with it. In this study, a multi-stage game model is used to characterize the changes in the decision-making of the maritime supply chain under different strategies, which can not only provide decision-making suggestions for the cooperation choices of shipping liners but also provide a theoretical basis for ports to attract investment from shipping liners.

The Effect of Dual Pricing and Promotional Strategies on Traders Income in Tourism Villages, Samosir Regency

One of the pricing methods is dual pricing, but many consumers still find it unfair. Dual pricing is an easy and realistic strategy for increasing income for small companies or traders. This is especially true for small traders who are not yet familiar with sufficient marketing strategies. Traders in the Tourism Village of Samosir Regency currently apply double prices in trading every day because they don't have an adequate marketing strategy, especially promotions. The purpose of this study is to find out how the income of traders in five tourist villages in Samosir Regency is affected by dual prices and promotion strategies. This study uses a quantitative approach, and data is processed using SPSS. The promotion strategy does not have a significant effect on the income of traders in the Tourism Village of Samosir Regency, but dual pricing has a positive and significant effect. This shows that traders use Dual Pricing as the main strategy to increase their business revenue. However, because merchants do not have a lot of marketing knowledge and enough marketing channels to sell their goods, the promotion strategy is not very effective. However, the results of the simultaneous test show that the Dual Pricing and Promotion Strategy Variables have a significant correlation with the income of traders in the Tourism Village of Samosir Regency. In addition, this shows that although the independent variables do not have the same strong effect partially, the marketing strategy and dual pricing have a significant correlation to income.

Share of manufacturing in India's GDP: Stagnant or increasing?

Contrary to a widely held impression that the share of manufacturing in India's GDP has long stagnated, the paper claims that it has increased significantly. Measured at the prices of different goods and services prevailing in 2004-05, and deflation applied separately with input prices as well as output prices to account for differential input price trends, the GDP share of manufacturing has increased during the post-reform period from about 17 per cent in 1993-94 to about 32 per cent in 2018-19. The paper notes that the concept of real share in GDP relates to the volume effect and represents the change in the share of the volume of manufacturing activity out of the volume of all economic activities in the Indian economy. Some explanation is provided for the apparent stagnancy of the share of manufacturing in India's GDP at current prices.

Differential energy pricing of industrial park operator based on potential game considering public loss allocation

With development of industrial aggregation, the industrial park energy operator (IPEO) offers energy supply services to factories with varying energy consumption requirements. Nevertheless, the unified energy pricing model is not conducive to the park operator's ability to attain a justifiable recuperation of energy supply expenses. To address these issues, a differential pricing strategy for the potential game of IPEO is proposed in this paper to achieve clean and efficient operation of industrial electric-heat energy systems (EHES). Firstly, a mechanism for allocating public losses is established in the pricing process, and the power loss of the network is precisely allocated to the user side using the complex power tracking method. Second, a potential game model for IPEO and its users is established based on the different interests of the participants. IPEO releases energy prices to users by maximizing energy sales as a profit function and considering the output of energy production facilities and purchased electricity. The user minimizes the cost of energy by considering the profit function, which takes into account the energy storage discharge and flexible load adjustment. Finally, the feasibility and validity of the proposed model are verified by comparing several cases. The simulation results show that the proposed model can fully consider the autonomy of the game participants and effectively enhance the benefits of each participant.

Turizmde mevsimselliğin yönetimi

Seasonality is usually recognized as a problem of tourism that has many negative consequences for the private and public sectors. The widespread impact of seasonality on tourism has increased the importance of understanding how these sectors can sustainably respond to such a phenomenon. This paper aims to examine the industry and government responses to seasonality. It specifically seeks to discover what responses the literature on tourism addresses to managing the problem of seasonality. The review indicates that tourism businesses and governments mainly respond to seasonality by developing strategies to tackle it when seen as a substantial problem or otherwise adapting to it. The literature points to various strategies for tackling seasonality in tourism. Common strategies include reducing demand in the peak season, increasing demand outside the peak season, reducing supply, increasing supply in the peak season, redistributing demand and supply, extending the main season, establishing additional seasons, diversification of the product mix and the markets, applying marketing campaigns and targeted advertising, using differential pricing, public sector incentives, development of urban, cultural, business, congress, religious, sports and winter tourism, and other alternatives, developing special-interest tourism, encouraging domestic tourism in the off-season, staggering the main school and industrial holidays over a longer period, and two-center holidays.

Investigating the effectiveness of tourism pricing strategies in mitigating post-COVID-19 economic challenges: an attribution theory perspective

PurposeThe study aims to investigate how attribution theory in the context of pricing strategies can help tourism destinations recover from the negative impacts of the COVID-19 pandemic.Design/methodology/approachThe study adopted a qualitative research design using semi-structured interviews to address the lack of research in this area. Interview participants included tourists and tourism customers. The interview responses were then analyzed using “Nvivo” qualitative data analysis software to identify critical themes regarding applying attribution theory to pricing strategies.FindingsThe findings revealed that tourists prefer bundled and hedonic pricing strategies that integrate the service providers' pricing strategies' locus of control, stability and controllability. Tourists do not favor dual pricing strategies unless the reasons for price controllability or stability are justified. Tourists also prefer the controllable pay-what-you-want pricing strategy. Although tourists accept dynamic pricing, certain conditions related to price locus, stability and controllability must be met.Practical implicationsThe research shows tourists prefer pricing strategies that give them control and flexibility, like bundled packages and pay-what-you-want models. Service providers should integrate pricing strategies that transparent costs and justify price fluctuations. While dynamic pricing is accepted if necessitated by external factors, tourists are wary of unnecessary price changes. Providers can build trust and satisfaction by explaining pricing rationale and offering controllable options like bundles.Originality/valueThe study contributes to the theory by applying attribution theory to the context of pricing strategies in tourism. It also provides innovative recommendations for tourism managers on how to use pricing strategies after the COVID-19 pandemic. The findings offer new insights that extend beyond previous research.

Refining the provider payment system of India’s government-funded health insurance programme: an econometric analysis

ObjectivesReimbursement rates in national health insurance schemes are frequently weighted to account for differences in the costs of service provision. To determine weights for a differential case-based payment system under...

Not one, but many: developing a multi-indication pricing model for medicines in Belgium.

Back ground: Current pricing and reimbursement models that focus on one indication at a time are not suited to address the market access of multi-indication medicines. Therefore, the aim of this study is to co-create with Belgian stakeholders a multi-indication pricing model and procedural pathway, to identify conditions for implementation, and to illustrate the multi-indication pricing model with a case study. Methods: Different multi-indication pricing models were identified from the literature, case studies and pilots in other countries. Semi-structured interviews were conducted with 21 representatives from the National Institute for Health and Disability Insurance, insurance funds, clinicians, patients, the policy cell of the Minister of Health, pharmaceutical industry and academia. These provided insight in the opinions of stakeholders about possible multi-indication pricing models and their feasibility in the Belgian context. Agreement on the preferred multi-indication pricing model and procedural pathway was reached in a multi-stakeholder round table. Results: The international review generated four main multi-indication pricing models that vary in terms of whether a uniform price or differential prices are applied, whether prices are adjusted for the volume and/or value of the medicine in each indication, and whether a proactive or retroactive dynamic pricing approach is used. However, Belgian stakeholders preferred a fifth model, which sets a single price as the volume- and value-weighted average price across all indications at launch. Over time, the price is adapted based on volume and value of the medicine in real-life practice for each indication. To implement this model, a legal framework, horizon scanning and early dialogue, data infrastructure, an evidence plan for the medicine, technical expertise and governance model need to be developed. Conclusion: Although the multi-indication pricing model preferred by Belgian stakeholders raises the administrative burden, it allows for the price of a medicine to vary during the lifecycle based on its initial and real-life performance in multiple indications.

Pricing for services with cross-segment externalities, capacity constraints, and competition

In many service systems such as movie theaters, sports clubs, or hotels, different customer segments share physical space, and the presence of customers from different segments may affect the utility a customer receives from the service. We consider a setting where two competing facilities offer service to two distinct types of customers and study whether and when the firms can benefit from using differential pricing. The two firms do not explicitly decide whether to use uniform or differential pricing. Rather, we derive our findings by characterizing and comparing all equilibria that might arise when differential pricing is feasible. Our results suggest that if the network externalities are symmetric, that is, if the two customer segments feel equally about the presence of customers of the other segment, then the firms never benefit from price differentiation, unless the network externalities are negative and strong when compared to the travel/inconvenience cost that the customers incur when receiving service from their less preferred facility. Interestingly, we find that using differential pricing can even hurt firm profits, when it leads to fierce price competition between the two service providers.

Decision-making in a low-carbon supply chain considering consumers’ fairness concerns

The purpose of our study is to discuss the impact of consumers’ market distribution and consumers’ fairness concerns on the decisions of supply chain participants. Based on utility theory, we innovatively incorporate consumers’ fairness concerns as a significant factor into the game model and focus on the impact of the utility gap between products on consumers’ purchasing willingness. In this paper, we establish a two-echelon supply chain consisting of one traditional manufacturer, one low-carbon manufacturer, and one retailer, and comparatively analyze the equilibrium results under the initial state and consumers’ fairness concerns. The results show that the presence of consumers’ fairness concerns results in the higher wholesale price, higher retail price, and larger profit of low-carbon products yet leads to a decline in traditional products’ pricing and profit, and the impacts on the low-carbon manufacturer are more significant than on the traditional manufacturer. A reduction appears in the retailer’s profit since consumers’ fairness concerns decrease the retailer’s ability to differential pricing. Additionally, the impacts of consumers’ fairness concerns on the game equilibrium are also affected by consumers’ market distribution and low-carbon manufacturers’ technical efficiency, and the impacts are more pronounced in an environment where low-carbon manufacturers’ R&D investments are more efficient. Furthermore, in a market dominated by low-carbon preferred consumers, low-carbon manufacturers are always more profitable than traditional manufacturers, while in a market dominated by traditionally preferred consumers, low-carbon manufacturers are only able to achieve higher profits than traditional manufacturers when R&D is quite efficient and consumers’ fairness concerns are relatively strong.

Let's lock them in: Collusion under consumer switching costs

Consumer switching costs reduce the price elasticity of existing customers while increasing competition for new ones, creating an “invest-and-harvest” incentive for firms. This paper examines the effect of this dual pricing incentive on firm behavior in a laboratory experiment both with and without switching costs and the ability to communicate. I find that switching costs reduce the price level for new consumers, while the price level for existing consumers is unaffected and the “harvesting” effect is comparatively muted. Markets with switching costs are more competitive and less tacitly collusive. Moreover, switching costs provide a focal point for price setting in the form of a minimum marginal cost mark-up, which is frequently chosen in tacit market sharing outcomes. The results have implications for antitrust policy.