Price Dimensions Research Articles

Strategic commitment with R&D: The case of Bertrand competition

When there is multiplicatively separable demand and firms compete in the price dimension, there is no room for strategic use of R&D by firms. Under a different demand situation, strategic use of R&D by firms competing in the price dimension reduces R&D spending, reduces output, increases price, and increases profits of each firm.

DIMENSIONS OF SATISFACTION WITH PURCHASES OF WOMEN'S DRESSES: BEFORE AND AFTER GARMENT CARE

The purpose of this research was to assess the appropriateness of grouping evaluative criteria used by women in their dress purchases according to instrumental, expressive, and market aspects. Respondents from a random telephone sample were divided into two groups, ‘Care’ and ‘Nocare’, according to whether or not the consumers had cared for (washed or cleaned) their dresses at the time satisfaction was measured. For both groups, factors were generated which were representative of the three aspects of evaluative criteria proposed. The factors reflected expressive, price, selection/size, and performance dimensions of clothing satisfaction. Hence, in analysing clothing satisfaction, researchers must recognize that several functions are served by clothing and reflect these in the research methodology.

Location choice when price is also a decision variable

One of the fundamental contributions of Hotelling's classic “Stability in Competition” paper is the focus on the interaction of the price and location choice variables. In most of the subsequent research in this area, the price dimension has been assumed away. In this paper the jointness of the two decisions is reintroduced and the results for N firms in a linear market are compared to the parametric price equilibria developed by Lerner and Singer and Eaton and Lipsey. Their conclusions are found to be valid for the N-2 interior firms in the more general model. But what has been lost because of the equal price assumption is the actions of the two exterior firms who exploit their uniqueness by charging higher prices to their “captive” buyers. A simulation of the dynamics of the price and location choice process confirms the analytically defined equilibria.

Revenue sharing and monopoly government: A reply

The purpose of our article on the economic consequences of revenue sharing was relatively straightforward: It was to refute, with a particular view of government, the commonly stated proposition that revenue sharing (as well as many other forms of inter-government grants) is intended to decentralize governmental powers by distributing federal government revenues to state and local governments. Further, our purpose was to argue that state and local governments saw in revenue sharing a means of cartelizing tax collections, of charging monopoly tax-prices. In this regard, our analysis extended the economic theory of regulation, developed by George Stigler and refined by others, to the state and local government 'market.' The line of analysis is fully compatible with explanations for the rate and regulations instituted by, for example, the CAB. We fully expected many of the same consequences experienced from, say, the regulation of the airline industry to appear in the government market. The main conclusions of the paper were (1) revenue sharing would move stat~ and local governments away from their competitive tax-price equilibrium (which was used in our article more as a conceptual reference point than as a description of the actual state of affairs in the real world) and would lead to greater tax collections by all levels of government and (2) would give rise to inefficiency in the allocation of resources. The comments of Professors Friedman and Kurth on our article are useful because they make quite explicit a point that was subsumed in our analysis, mainly that regulation and control of competition in the price dimension will lead to competitive pressures in areas not controlled. As in the case of regulation of the airline industry, suppressed price competition can be, eventually, expected to be reflected in non-price dimensions, like the quality and quantity of government services. These points do not disturb us for two reasons. First, again, our purpose was to argue that revenue sharing leads to inefficiency, and inefficiency that goes by the name of'under' or 'over' production is still inefficiency. Second, the Friedman-Kurth argument reinforces our position which is that state and local government officials had a private interest in the creation and extension

The Industrial Strategy and Manpower Policy: Some Puzzles

Introduction It is now part of the conventional wisdom that the success of the industrial strategy is vital because the UK “needs a healthy manufacturing industry”. Proposals have been made to allocate a substantial proportion of the additional revenues from North Sea oil and gas to domestic manufacturing capacity and to stimulate employment directly. But how are these allocative decisions to be resolved? Even if we accept the conventional wisdom of an industrial strategy, which industries and regions are to be the focus of public policy and why? What are the manpower implications of the industrial strategy? Proposals for more skilled labour cannot be divorced from industrial, locational and factor “mix” decisions. Potential conflicts exist between industrial and employment policy. Efforts to increase the competitiveness of UK manufacturing industry through increased investment and higher productivity will result in the substitution of capital for labour and hence job loss; at the same time, policy aims to increase employment in manufacturing! Not surprisingly, estimates of a “job gap” of some 2 millions by 1981 dominate the debate, although such forecasts usually fail to refer to the price dimension, especially assumptions about the set of relative and real wage rates.

Perceived situational effects on price sensitivity

In this article, the multidimensionality of price as perceived by members of a consumer panel is examined. Respondents are first classified as price-sensitive or non-price-sensitive with respect to a durable and a nondurable product. Several dimensions of price are then described within the framework of brand purchase decision situations, and consumer evaluations of the importance of each situational dimension are measured. Dimensions perceived as important by price-sensitive persons are different from those considered important by non-price-sensitive consumers. Variations exist in the importance of price dimensions based on type of product.

Performance Evaluation of New York Stock Exchange Specialists

This study's purpose was to construct a performance criterion for New York Stock Exchange specialists which relates to their ability to affect price variability. It was emphasized that the price-setting behavior of the specialists, at times when trading imbalances prevail in the market, is the most important aspect of their performance. Their performance in this dimension may or may not be associated with their willingness to supply immediacy services to small orders. While the bid-ask spread is the correct variable to measure when the latter is considered, price variability or, more precisely, the functional relationship between price changes and trading imbalances is the variable to be measured when the price-setting behavior is of interest. While the experiment to evaluate the price-setting behavior of NYSE specialists using publicly available data may be considered a pioneer study, other studies have estimated the determinants of the bid-ask spread. The contributions of this study to the analysis of the spread can be summarized as follows: (a) observing an independent “specialist effect” on the size of the spread, (b) estimating the spread-volume relationships using a simultaneous system, and (c) estimating the association between the specialists' performance on both spread and price dimensions of their activity. The finding of this study is that there is a positive correlation between the quality measure of performance on both dimensions.

International Dimension of Agricultural Prices

Events of the past two years, specifically the agricultural price explosion of 1973, have strongly emphasized the growing interdependency of countries in the production, consumption and trade in agricultural products. The illusion of a closed agricultural economy has been dealt a series of severe blows. The world monetary crisis, the dollar devaluations, and sharply increased foreign demand for U.S. commodities have suggested that there is a single world market for basic commodities.