Increase In Retail Price Research Articles

TESTING THE “WATERBED” EFFECT IN MOBILE TELEPHONY

This paper examines the impact of regulatory intervention to cut termination rates of calls from fixed lines to mobile phones. Under quite general conditions of competition, theory suggests that lower termination charges will result in higher prices for mobile subscribers, a phenomenon known as the waterbed effect. The waterbed effect has long been hypothesized as a feature of many two-sided markets and especially the mobile telephony industry. Using a uniquely constructed panel of mobile operators’ prices and profit margins across more than twenty countries over six years, we document empirically the existence and magnitude of this effect. Our results suggest that although regulation reduced termination rates by about 10%, this also led to a 5% increase in mobile retail prices. We also provide evidence that both competition and market saturation, and most importantly their interaction, affect the overall impact of the waterbed effect on prices.

Considering third-party logistics providers in reverse logistics

Enterprises have difficulty in completing all the required operations when facing market competition and environmental changes. In such situations, enterprises begin to explore their capacity to outsource logistics from external support, hence giving the existence of a third-party logistics. But in recent years, few scholars have inducted the third-party logistics to reverse logistics. This study thus explores the relationships among recycling by manufacturers, retailers, and third-party logistics providers in the framework of reverse logistics. Returned items must be disassembled, inspected, and disposed off to determine if they can be re-manufactured in the recycling process. Thus, this study constructs a mathematical model to get the maximum profit under the assumption that transfer price is induced by a third-party logistics service. From an overall supply chain standpoint of total profit, the third model in which the third-party provider leads returned product collection before transferring back to the manufacturer for remanufacturing, is preferred. This study shows that it is feasible when a third-party logistics provider is used in the reverse logistics system and that return rate and retail price are the main determinants of total profit. Therefore, the total profit increases when the retail price increases.

Residential and Regional Electricity Consumption in the U.S. and EU: How Much Will Higher Prices Reduce CO 2 Emissions?

Results of our analysis suggest that, given the price-inelastic behavior in both the U.S. and EU regions, public policies aimed at fostering a transition to a more sustainable energy system in order to address the climate change challenge will require more than an increase in electricity retail price if they are to induce needed conservation efforts and the adoption of more efficient technologies by households.

Estimating the Impacts of Outlet Rationalization on Retail Prices, Industry Concentration, and Sales: Empirical Evidence from Canadian Gasoline Markets

The retail gasoline industry in both Canada and the United States experienced a significant rationalization of outlets from the late 1970s through the 1990s. We estimate the impacts of reduced outlet density by exploiting the 27% decline in retail gasoline outlets across 10 Canadian cities between 1991 and 1997. Ordinary least squares and instrumental variables estimates suggest that rationalization resulted in a significant increase in retail prices, market concentration, and average outlet sales. The decline in retail outlets led to a 9% increase in retail prices, a rise in market concentration between 16% and 22%, and a 22% increase in average outlet sales.

Economic efficiency of alcohol policy.

Economic efficiency of alcohol policy.

Suspicion and Perceptions of Price Fairness in Times of Crisis

Times of crisis bring about increased demands on businesses as shortages, or unexpected but significant, business costs are encountered. Passing on such costs to consumers is a challenge. When faced with a retail price increase, consumers may rely on cues as to the motive behind the increase. Such cues can raise suspicion of alternative motive (e.g., taking advantage of the consumer) affecting consumers’ judgments of price fairness. This research investigates two triggers of suspicion: salience of alternative motives, and behavior judged to be out-of-character for the business. Results of the two studies within crisis contexts indicate that suspicion is created when alternative motives are salient and when a retailer acts out-of-character. Multiple group analyses revealed that suspicion induced negative affect and subsequent perceptions of price fairness. When suspicion was present, more negative feelings toward the retailer and judgments of price unfairness resulted.

Aftermath of the Financial Crisis in Russia

The Russian economy has a raw orientation. This fact affects features of financial crisis in Russia. While central banks worldwide decreased refinancing rates, the Bank of Russia, in contrast, increased it. In Russia budgetary expenses increase, despite of set of internal problems. In Russia we both the highest inflation and the deepest economic slump. An increase in retail prices and the some time declined wholesale prices. The rich Russian regions appeared among most suffered from crisis. At the same time the poor regions have not noticed the crisis, as their budgets exist due to grants from the federal budget, and their own revenue are little.

Testing the 'Waterbed' Effect in Mobile Telephony

This paper examines the impact of regulatory intervention to cut termination rates of calls from fixed lines to mobile phones. Under quite general conditions of competition, theory suggests that lower termination charges will result in higher prices for mobile subscribers, a phenomenon known as the effect. The waterbed effect has long been hypothesized as a feature of many two-sided markets and especially the mobile telephony industry. Using a uniquely constructed panel of mobile operators' prices and profit margins across more than twenty countries over six years, we document empirically the existence and magnitude of this effect. Our results suggest that although regulation reduced termination rates by about 10%, this also led to a 5% increase in mobile retail prices. We also provide evidence that both competition and market saturation, and most importantly their interaction, affect the overall impact of the waterbed effect on prices.

Inventories, Lumpy Trade, and Devaluations

Fixed transaction costs and delivery lags are important costs of international trade. These costs lead firms to import infrequently and hold substantially larger inventories of imported goods than domestic goods. Using multiple sources of data, the authors document these facts. They then show that a parsimoniously parameterized model economy with importers facing an (S, s)-type inventory management problem successfully accounts for these features of the data. Moreover, the model can account for import and import price dynamics in the aftermath of large devaluations. In particular, desired inventory adjustment in response to a sudden, large increase in the relative price of imported goods creates a short-term trade implosion, an immediate, temporary drop in the value and number of distinct varieties imported, as well as a slow increase in the retail price of imported goods. The authors' study of 6 current account reversals following large devaluation episodes in the last decade provides strong support for the model's predictions

The Effect of Cigarette Price Increases on Smoking Cessation in California

We investigated whether smoking cessation increased in California after a cigarette manufacturer's retail price increase and an increase in the state cigarette excise tax. The sample for this study was drawn from the 1996 and 1999 California Tobacco Surveys. The rate of unsuccessful and successful quit attempts and the rate of abstinence were calculated for each month of the 14-month period preceding each survey administration. We combined the monthly rates for both surveys and used multiple regression modeling to test whether the proportion of smokers reporting a quit attempt and the proportion of smokers reporting abstinence increased during the period following the price increases. We included several covariates in our models to control for factors other than the price increases that could account for any increases observed in quit attempts and abstinence. Because smokers recall quits occurring closer to the date of the survey better than quits occurring further back in time, we included a term in the models representing the number of months elapsed between the survey administration and the reported quit. We also included terms in the models representing the months before and after the over-the-counter (OTC) availability of the nicotine patch and nicotine gum in 1996 to control for the increase in smoking cessation observed following the availability of OTC nicotine replacement therapy (NRT). Lastly, in order to control for increased quits made in January as a result of New Year's resolutions, we included a term in our models for quit attempts and successful quits (abstinence) made during this month. Results of the regression analyses indicated a significantly greater proportion of smokers reported quit attempts (p < 0.05) in the months immediately following the cigarette price increases (after November 1998); however, a significant increase in abstinence was only observed from December 1998 through March 1999 (p < 0.05) relative to abstinence occurring before the price increases.

Cost Pass-Through in the U.S. Coffee Industry

A rich data set of coffee prices and costs was used to determine to what extent changes in commodity costs affect manufacturer and retail prices. On average, a 10-cent increase in the cost of a pound of green coffee beans in a given quarter results in a 2-cent increase in manufacturer and retail prices in that quarter. If a cost change persists for several quarters, it will be incorporated into manufacturer prices approximately cent-for-cent with the commodity-cost change. Given the substantial fixed costs and markups involved in coffee manufacturing, this translates into about a 3-percent change in retail prices for a 10-percent change in commodity prices. We do not find robust evidence that coffee prices respond more to increases than to decreases in costs.

ALCOHOL TAXES SAVE LIVES: RESPONSE TO HOLDER

We are grateful to Harold Holder for his careful review of our paper and insightful summary of the implications of our findings (Holder 2005). We strongly agree that the main conclusion to be drawn from our somewhat complex analyses is that alcohol taxation is a potent means of reducing population level acute mortality caused by alcohol. We also agree that we cannot confidently attribute the reductions in deaths caused by the chronic effects of excessive drinking in the population as a whole to a delayed response to the Living With Alcohol (LWA) levy and/or programme itself. The results presented for Indigenous and non-Indigenous Australians both showed large reductions in chronic deaths after the Levy was removed, although this change was significant only with a simple t-test for the non-Indigenous population. We would note, however, that the results shown for Indigenous and non-Indigenous deaths lacked controls that were available for our other analyses, i.e. controls to reflect changes in alcohol-caused deaths in adjoining geographic areas and also in non-alcohol-caused deaths in the Northern Territory (NT) itself. This was due to the lack of reliable data on Indigenous status in the control regions and until quite recently in the NT (Chikritzhs et al. 2005). They are, however, indicative of some benefits from an alcohol tax increase to Indigenous Australians which is important, given concerns often expressed that price increases would only further disadvantage this sector of Australian society. We further acknowledge that we cannot be sure of the extent to which the new programmes funded by the alcohol tax contributed to the measured reduction of alcohol-caused deaths over and above the effects of the tax itself. In reviewing the nature of the programmes that were funded we formed the opinion earlier that many had been shown to be effective in other studies (Stockwell et al. 2001), such as the enforcement of liquor laws with supportive media campaigns (e.g. McKnight & Streff 1994) and drink-driving campaigns (McKnight & Voas 2001). We would like to add the information that while the tax administered for the first 5 years of the LWA programme on alcoholic drinks with 3.0% or more alcohol content by volume may seem minor—just 5 cents per standard drink (or per 10 g of ethyl alcohol)—at that time this amounted to a substantial increase in retail price of cheap high alcohol content drinks often linked with serious alcohol-related harm (e.g. Stockwell et al. 1998). The tax increase was indeed passed on to the customer (Chikritzhs et al. 1999) and was equivalent to approximately 15% of the retail price of popular packaged wine and some 8% of the price of full strength beer purchased from a liquor store (see e.g. Stockwell & Crosbie 2001). Another limitation was that our analyses were only of impacts on that most significant of all bottom lines in public health and safety—premature mortality. We were unable to access sufficiently complete and reliable data from all three jurisdictions for more fine-grained analyses of, for example, road crashes or hospital separations for specific causes other than those that were fatal. Our previous analysis of the first 4 years of the LWA (Chikritzhs et al. 1999; Stockwell et al. 2001) found evidence of widespread health and social benefits across these various domains. The unfortunate postscript to this story is that an Australian High Court ruling in August 1997 struck down the constitutional right of the states and territories to raise any taxes on alcohol (or tobacco or petrol). We believe our research adds to the international evidence that this very power to raise alcohol taxes is also the power to prolong the lives of tax payers. We hope our findings will be used to encourage other jurisdictions, including the Commonwealth Government of Australia, to use alcohol taxes as a means of preventing premature mortality caused by alcohol.

Privatization and Price Liberalization: Comparative Analysis

Two transition paths from a mixed to market economy are investigated: a gradual increase in state retail prices and a gradual decrease of the state sector's share of the economy. The analysis is carried out in the framework of a general equilibrium model of a mixed economy with production. It is shown that, for a representative agent, privatization is better than price liberalization during the entire transition period regardless of individual preferences. For an economy with heterogeneous agents the conclusion remains valid for rich agents, but it is indeterminate for poor agents.J. Comp. Econom.,June 1997,24(3), pp. 313–334. Central Institute of Economics and Mathematics, Moscow 117418, Russia.

Anti-tobacco measures in the world: the French case

The devastating long-term effects of tobacco smoking registered in the developed world and now imminent in the developing world must be responded to on national and international levels. In France, governmental tobacco control action began in 1976. Despite the high rates of premature mortality among men and women, legislative controls that were introduced were not enforced. Over the past decade, overall smoking prevalence has remained stable, reflecting growth in women's rates which compensates declines in men's rates. Comprehensive tobacco control measures should include prohibiting tobacco advertising, real tobacco retail price increases and regulations protecting non-smokers in public places. New legislation was voted in 1991 both in France and in the European Community. These measures, reinforced by a framework of continuing public education, may be an important step towards effective health promotion.

Impact of Milk Supply Management on the Midwest

The US dairy industry has experienced surplus milk since 1979. As a result, supply management has been a frequent topic of discussion. Although Midwest dairy farmers in general favor some type of supply management for milk over the alternatives of further cuts in the support price, there does not appear to be a majority support for a specific supply management proposal at this time.Supply management proposals result in higher farm milk prices than would exist under supply and demand conditions. Thus, gross dairy farm income would be enhanced with supply management. However, the amount of net income is less certain. Consumer response to retail price increases is about four times greater for manufactured dairy products than for fluid products. Over 80% of the milk in the Midwest is utilized for manufactured products. A mandatory supply management program that increases retail prices substantially and is administered on a regional basis could call for a reduction in milk production that would reduce net dairy income to Midwest producers. The impact on dairy farm structure depends upon how bases and quotas are allowed to be transferred.

More attacks on government's NHS spending plans

In the Commons debate on the government's public spending white paper?no relief is offered by the plans to the beleaguered National Health Service, according to Mr Frank Dobson, Labour's health spokesman?Mr Peter Rees, chief secretary, the Treasury, claimed that the new plans more than met the government's election com? mitments. Since coming into office in 1979 we have doubled health spending?an increase of 17% above the increase in retail prices, he said. As for the performance of the hospital and community services, that had increased steadily year by year since 1978. Before claiming histrionically that the government had destroyed the finest creation of Lord Beveridge, Aneurin Be van, and Lord Attlee, the Opposition would do well to ponder the facts set out in the white paper's tables, uncomfortable though that might be. Mr Roy Hattersley, shadow Chancellor, thought that Mr Rees's message that the government was sticking on course amounted to saying, Do not worry. We are still on course. The Titanic is moving in its predestined direction. He said that throughout the United Kingdom the level of provision for the NHS had declined tragically and disastrously. Mr Tony Benn, making his debut as MP for Chesterfield, also attacked the government for its record on the NHS. It is no good talking about more money going into the NHS in real terms if 8000 qualified nurses are out of work, he said. There is no point in saying The NHS is safe with us' when 3000 doctors will be out of work by the end of the year. This was a government representing the strong and attacking the weak. Mr Mark Fisher, Labour MP for Stoke on Trent Central, said that Mr Rees had tried to claim that there had been an increase in health spending in real terms, but the figures showed that it would be frozen in real terms. Anyone who knew anything about health knew that an increase of at least 1 ? 5% a year in real terms was needed just to stand still, much less to bring about any development. Nor had Mr Rees made any reference to the demand of an aging population for health care. Mr John Townend, Conservative MP for Bridlington, said that sacred cows must no longer be protected, and the largest of these was the Department of Health and Social Security, which by 1986-7 would account for 43% of total depart? mental spending. He then urged the government to achieve real cuts in public spending?ministers must get out the hatchet. He argued that since under the government the number of nurses had risen by 46000 and of doctors and dentists by 6000, then those who claimed that the quality of health care had declined must be questioning the efficiency, effectiveness, and productivity of nurses and doctors. Mr Terry Davis, shadow Treasury spokesman, said that anybody who took an interest in the NHS knew that the budget needed to be increased by another 0*5% to take account of technological change, and there was no provision for that in the white paper. A real cut in the budget for the NHS would be experienced in the next three years, he added. Closing the debate, Mr Barney Hay hoe, Minister of State, the Treasury, said that the Griffiths report held out the promise of greater efficiency and effectiveness and that that could provide additional resources for patient care. The NHS was expected to introduce major efficiency savings to provide improvements in services and to reduce waiting lists. Labour's solution on deputising

The bottle bill: Perceptions of inconvenience, litter and willingness to pay in Western New York

Returnable container legislation in New York requires that all carbonated soft drink and beer containers carry a minimum five-cent deposit and bans detachable metal tabs and nonbiodegradable plastic loops. A continuing environmental policy issue is whether the benefits of a less-littered environment and reduction of solid waste are greater than the increase in retail prices and inconvenience costs to the consumer. This paper reports consumer estimates of the inconvenience of returning beverage containers to a store, perceptions of the litter problem, and willingness to pay to reduce litter in Wellsville, NY. Nearly two-thirds of the respondents believe that litter is a major problem. Most important, 76% of those interviewed reported they were willing to pay 10 cents, and 42% thought they were willing to pay 15 cents to reduce litter. Nearly one-half of the respondents did not think returning containers to the store would be inconvenient, but 22% stated that the process would be inconvenient. Correlations between the attitudes and income, education, and age are reported. These findings will be of interest to New Yorkers as they evaluate the bottle bill, as well as to individuals in other states considering returnable container legislation.

LARGE FIRMS AND PRICE CONTROL

SUMMARYWith the increase in the rate of inflation in recent years, most economists have probably come to accept the need for price control, even though they might oppose it in more normal circumstances. However the view is still very wide‐ spread ‐among economists and probably among politicians and the general public – that for an effective system of price control to exist, it is only necessary to control the prices charged by large firms. It is believed that smaller firms will then follow suit, either because they are forced to by the competition of large firms or for some other reason. Recent experience in the U.K. seems to refute this thesis conclusively. It is in the sectors in which small firms predominate that prices rose most rapidly during the two or three years preceding the imposition of price control; this has continued since price control was imposed in November 1972. No explanation of this is attempted, but it is argued that if price control is to be effective it must be extended to all firms irrespective of size. This would raise administrative problems, but it is suggested that these could be dealt with. The character of inflation, like other aspects of the economic situation, can change rapidly. It is possible that with the introduction of the three‐day week in British industry in February 1974 (as a consequence of the miners’strike) and the continued rise in import prices (especially the price of oil) the high profits which characterised the years 1971, 1972 and 1973 in Britain will prove to be temporary. However the basic point remains. During these years, the rise in profits added significantly to the increase in retail prices, and this rise took place not only in sectors where large firms are found but also in sectors characterised by the predominance of small and medium‐size firms.

Optimal Beef and Pork Marketings

A multi-equation model of the beef-and-pork sector of the economy was used to determine quarterly marketings of beef or pork that would have maximized annual gross farm income from beef and pork each year during 1950-1961. Fixing beef marketings at their actual levels, we find that pork producers could have increased their annual gross incomes an average of 45 percent if they had reduced marketings by an average of 35 percent. Fixing pork marketings at their actual levels, we find that beef producers could have increased their gross incomes an average of 25 percent by reducing marketings an average of 30 percent. Several other constrained and unconstrained maximum solutions were computed. Cross-effects were evaluated. Effects on retail prices of reductions in farm marketings and compensating variations in consumer incomes required to offset these retail-price increases were computed.