Initial Price Research Articles

IPO Pricing in Germany and Switzerland in the New Millennium: Tests on Underpricing and Long-Term Performance

We provide an updated analysis of initial public offerings (IPOs) by Swiss and German companies after the turn of the millennium up to 2020. We compare the characteristics of initial pricing to those observed in prior studies, test conventional hypotheses about underpricing cross-sectionally, and analyze the long-run performance of IPO firms. Our sample included 72 IPOs in Switzerland and 307 IPOs in Germany. We found an average (median) underpricing of 13.27% (7.19%) for Swiss IPOs and an average (median) of 21.50% (3.7%) for German IPOs; the averages dropped to 6.45% and 5.82%, respectively, after excluding the hot-issue market in 2000. Among the cross-sectional explanations, interesting effects can be observed with respect to the bookbuilding width and transparency standard of the listed market segment, as well as the reputation of the underwriter and the value of the greenshoe option. We documented strong post-issue underperformance for holding periods up to 120 months, which were, however, only present in the Swiss sample for median, not mean, returns.

Joint optimization of dynamic pricing, quality, and production quantity in the presence of online reviews: A distributionally robust optimization approach

This paper investigates the joint pricing, product quality, and production quantity decisions of a firm in a two-stage scenario, considering potential market demand uncertainty and the existence of online reviews. Two decision models are established based on whether the firm adjusts product quality and prices according to consumer feedback from reviews: a static model (as a baseline) and a dynamic model. In the static model, the firm decides product quality, prices, and production quantity in the first stage, while in the second stage, the firm does not enhance product quality, and prices remain unchanged. In the dynamic model, in the first stage, the firm decides initial product quality and pricing, then in the second stage, adjusts product quality based on consumer feedback and sets pricing accordingly. We propose a distributionally robust optimization (DRO) method to address this problem, obtaining a closed-form solution for the expected profit function under the worst distribution, making it easy to determine the optimal decision. Through numerical simulation analysis, we find that the firm implementing dynamic decisions always make higher profits compared to those using static decisions. This highlights the superiority of dynamic decisions in adapting to market changes and improving product quality. We also analyze the impact of expected and standard deviation of potential market demand, as well as consumer private assessment weight, on business decisions and profits. Our research provides effective support for firms with limited market information, enabling them to better formulate joint pricing, quality, and production decisions.

Real options analysis for regional investment decisions of household PV-ESS in China

This paper takes 30 provinces in China as the research subjects and constructs a real options model to explore the impact of carbon emissions trading market, energy storage subsidies, and their synergy on the optimal investment decision of household PV-ESS projects. The results show that a single factor has a catalytic effect on project investment, and both together have a better effect. And, project investment benefits are better in areas with abundant light resources and higher than average electricity prices. In addition, a sensitivity analysis is conducted on the initial investment cost, CO2 price, and energy storage subsidies. The results show that immediate investment in all provincial projects can be achieved when the initial investment cost is reduced by 50%, or the CO2 price is increased by about 33 times, indicating that the current environment is insufficient to attract investors. The results provide a reference framework for investment in household PV-ESS projects.

Optimization of Financial Indicators in Shale-Gas Wells Combining Numerical Decline Curve Analysis and Economic Data Analysis

We present a methodology to determine optimal financial parameters in shale-gas production, combining numerical simulation of decline curves and stochastic modeling of the gas price. The mathematical model of gas production considers free gas in the pore and the gas adsorbed in kerogen. The dependence of gas production on petrophysical parameters and stimulated permeability is quantified by solving the model equations in a 3D geometry representing a typical fractured shale well. We use Monte Carlo simulation to characterize the statistical properties of various common financial indicators of the investment in shale-gas. The analysis combines many realizations of the physical model, which explores the variability of porosity, induced permeability, and fracture geometry, with thousands of realizations of gas price trajectories. The evolution of gas prices is modeled using the bootstrapping statistical resampling technique to obtain a probability density function of the initial price, the drift, and the volatility of a geometric Brownian motion for the time evolution of gas price. We analyze the Net Present Value (NPV), Internal Rate of Return (IRR), and Discounted Payback Period (DPP) indicators. By computing the probability density function of each indicator, we characterize the statistical percentile of each value of the indicator. Alternatively, we can infer the value of the indicator for a given statistical percentile. By mapping these parametric combinations for different indicators, we can determine the parameters that maximize or minimize each of them. We show that, to achieve a profitable investment in shale-gas with high certainty, it is necessary to place the wells in extremely good locations in terms of geological parameters (porosity) and to have exceptional fracturing technology (geometry) and fracture permeability. These high demands in terms of petrophysical properties and hydrofracture engineering may explain the industry observation of “sweet spots”, that is, specific areas within shale-gas plays that tend to yield more profitable wells and where many operators concentrate their production. We shed light on the rational origin of this phenomenon: while shale formations are abundant, areas prone to having a multi-parameter combination that renders the well profitable are less common.

Assessing and prioritizing biogas energy barriers: A sustainable roadmap for energy security

Pakistan is trying to alleviate energy poverty by tapping into the full potential of biogas. However, the production of biogas is hampered by a variety of barriers. Although many researchers have pointed out these barriers, their impact on Pakistan's biogas market remains unclear. This study prioritizes possible barriers and identifies the most practical solutions for energy security in the nation in an effort to bridge this knowledge gap. We find 25 sub-barriers and classify them into five major categories using a literature study and a modified Delphi approach. The analytical hierarchy process (AHP) is used to assign a priority ranking based on weight allocation to barriers. The most influential alternatives to these barriers have been prioritized using the Grey Technique for Order Preference by Similarity to Ideal Solution (G-TOPSIS). According to study findings, among the major categories, “monetary barrier” is the most significant barrier. The top sub-barrier is “high initial price.” “Suitable monetary rewards” and “improved specialized technology” have been proposed as the most viable alternative. Finally, study findings suggest essential and useful policy recommendations to speed up the current progress of biogas energy through coherent and consistent efforts.

Information Aggregation Under Ambiguity: Theory and Experimental Evidence

Abstract We study information aggregation in a dynamic trading model. We show theoretically that separable securities, introduced by Ostrovsky in the context of Expected Utility, no longer aggregate information if some traders have imprecise beliefs and are ambiguity averse. Moreover, these securities are prone to manipulation as the degree of information aggregation can be influenced by the initial price set by the uninformed market maker. These observations are also confirmed in our laboratory experiment using prediction markets. We define a new class of strongly separable securities, which are robust to the above considerations and show that they characterize information aggregation in both strategic and non-strategic environments. We derive several testable predictions, which we are able to confirm in the laboratory. Finally, we show theoretically that strongly separable securities are both sufficient and necessary for information aggregation but, strikingly, there does not exist a security that is strongly separable for all information structures.

Assessing clinical benefit in the Medicare Drug Price Negotiation Program: A 2-step approach for improving transparency, consistency, and meaningful patient engagement.

In early 2024, the Centers for Medicare & Medicaid Services (CMS) will send initial price offers to the manufacturers of the first 10 drugs selected for the Medicare Drug Price Negotiation Program, established under the Inflation Reduction Act. However, CMS has not specified exactly how it will adjust the starting point for an initial price offer based on assessment of a drug's clinical benefit. This article addresses unanswered questions relating to CMS' methods for assessing clinical benefit. Specifically, we address how CMS can weigh various measures of evidence, ensure transparency and consistency, meaningfully incorporate patient and other stakeholder perspectives, and support addressing evidence gaps. We propose a 2-step approach for assessing the overall clinical benefit of a selected drug compared with its therapeutic alternatives that builds on the framework outlined by CMS. In step 1, CMS would evaluate conventional clinical benefit, defined in terms of outcomes commonly used in clinical studies for the selected drug and indications. In step 2, CMS would evaluate other outcomes broadly related to patient experience that are not adequately represented in the clinical literature. Overall, our approach incorporates the advantages of both qualitative and quantitative approaches to value assessment and decision-making. We describe a set of loose decision rules to improve transparency and consistency, recommend incorporating ranks and weights to signal to researchers and manufacturers which elements of clinical benefit and sources of data are the most important, and center meaningful deliberation with clinical experts, patients, and caregivers.

UNSUR GHARAR DALAM PEMBERIAN VOUCHER PROMO SHOPEE

This research aims to understand the practice of giving promotional vouchers on the Shopee application and identify elements of gharar. The research method used is qualitative, by conducting field research using interviews, documentation and observation. The research results show that the practice of giving promo vouchers through the Shopee application is a program organized by Shopee.id. The mechanism of this program is simple, where Shopee application users who are interested in getting promo vouchers must participate in a prize draw or other promo. Users must fulfill the terms and conditions set by the organizer. These terms and conditions can be easily accessed via the Shopee application or the official Shopee website. However, gharar practices were found related to giving Shopee promotional vouchers among STIS Al-Hilal Sigli students. Some students experienced uncertainty where the vouchers were not provided as promised. For example, even though customers are supposed to get a 20% promotional voucher, the price of the item after the promo does not reflect the promised discount. For example, if the initial price of an item is IDR 10,000, it should be IDR 8,000 after the promo, but in reality this is not the case. This creates uncertainty and ambiguity regarding the benefits that users should obtain through providing promotional vouchers

The Role of Affordability on the Adoption of Residential Point-of-Use Drinking Water Filtering Systems in China

Access to clean drinking water is fundamental to human health, but a significant portion of China’s population lacks this essential resource due to low water quality. Point-of-use (POU) water filtering systems, offering ease of installation and maintenance, have emerged as a viable solution for providing clean drinking water in China. However, despite their advantages, the adoption rate remains below 20%. This study investigates whether and how price affordability affects the adoption of residential POU water filtering systems in China. In doing so, we conduct a quantitative analysis of the national POU water filtering systems sales and household income data from 2007 to 2022 in China. Our results show that the ratio of the initial purchase price to per capita disposable income and the adoption rate of POU systems in China are strongly positively correlated. Our findings shed light on potential pathways to facilitating their wider adoption, not only in China but also in other emerging countries.

Mechanism and Hints Behind the Anchoring Effect in Sales, Auction, and Willingness to Pay

The anchoring effect, a cognitive bias, has substantial implications in various fields, including behavioural economics. It influences individuals' assessments and choices by anchoring them to specific initial values and causing insufficient adjustments. This article explores the anchoring effect's mechanisms and its impact on B2B sales, auctions, and willingness to pay. It also offers guidance for business owners, price-setters, and auctioneers to leverage the anchoring effect to their advantage. In B2B sales, results indicate that when salespeople are informed of higher reference discounts, they tend to offer significantly higher discounts to new customers, which leads to conservatism and cause a systematic distortion in various economic contexts. This demonstrates the positive impact of reference discounts on pricing decisions, driven by a tendency to avoid risk. Auction item sequences influencing bidding outcomes. Auctions featuring more valuable items first yield higher revenues, as buyers anchor their expectations to the initial prices. Sellers can strategically position items to maximize profits, particularly when the initial auction prices are set lower than market expectations. Studies also reveal that Lower anchoring prices may decrease willingness to pay (WTP) while higher initial reference points can lead to higher WTP. Additionally, the use of "up to" in advertising discounts can positively affect WTP due to an asymmetry effect.

Pricing and Timing Decisions in Promotion Channels

When planning for online promotion festivals, retailers must consider both pricing and timing decisions to determine an appropriate promotion strategy. In this article, we first consider <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">retailer-promotion channel</i> where the retailer sells a new product on his marketing channel in normal and promotion sales periods. A greater number of early consumers can reduce late consumers' risk perception for product performance and increase their utilities via word-of-mouth. Consumers arriving in the promotion sales period strategically time purchases to maximize their utilities. Our analysis shows that when word-of-mouth is strong and consumers are patient to wait for price markdown, the retailer increases the price from that of the normal sales period and then provides price discounts. Otherwise, the retailer sets a high initial retail price to earlier pursue high marginal profit. We then consider <italic xmlns:mml="http://www.w3.org/1998/Math/MathML" xmlns:xlink="http://www.w3.org/1999/xlink">platform-promotion channel</i> where the retailer sells the product on the platform. Our analysis suggests that three additional factors in platform-promotion channel, commission rate, subsidy level, and market expansion, have distinct impacts on the equilibrium pricing and timing decisions. Interestingly, we find that the retailer's profit can be nonmonotonic in the subsidy level and a higher subsidy level does not necessarily induce the retailer to engage in platform-promotion channel.

The JOBS Act and IPO underpricing

In the realm of Initial Public Offerings (IPOs), the initial day stock price return, known as underpricing, poses a considerable financial burden on capital issuers. This study scrutinizes two hypotheses regarding IPO underpricing: the general information asymmetry theory, positing that ‘underpricing’ compensates for investor uncertainty about firm quality, and the practical underwriter-institutional investor collusion, potentially explaining the recent upswing in underpricing.Our findings indicate that the JOBS Act contributes to an increase in overall IPO underpricing post its 2012 enactment, aligning with the traditional adverse selection phenomenon. Notably, empirical analysis reveals a corresponding upsurge in underpricing tied to the increasing proportional shares of institutional investors in the post-Act period, supporting the collusion hypothesis. In summary, this paper underscores a notable side effect of the JOBS Act, revealing a pronounced increase in underpricing for issuers and subsequently enhancing the attractiveness of the underwriting business.

Are the Newest Anti-Alzheimer’s Medicines Being Evaluated Under Outdated Pricing Paradigms?

The 2021 approval of aducanumab in the United States, was not followed by approvals in Europe, Canada, Australia or elsewhere; nonetheless, the initial pricing of $56,00.00/year created a firestorm of controversy. The 2023 Food and Drug Administration approval of lecanemab has been followed by approvals in Japan and China. The current (2024) costs are $26,500 in USA, $20,438 (National Health Insurance) in Japan and $28,180 (private market) in China. In Europe, a health technology assessment will drive coverage decisions and set single-payer prices for each health system for lecanemab and subsequently approved new treatments. For comparison, 2024 average pricing for the top five selling drugs for cancer [$198,273], arthritis [$83,666], hepatitis C [$75,118] and multiple sclerosis [$86,765] far exceed lecanemab’s annual cost. Could there be an anti-brain-health bias? The International Consortium for Health Outcomes Measurement notes that patient-centered outcome measures represent the ultimate measure of quality and they are always multi-dimensional. Quality-adjusted life-years (QALY) seem to be absent from the computation of pricing for anti-dementia treatments. Although global consensus on QALY calculations remains elusive, currently extant data are compelling. The QALY calculation is the change in utility value induced by the treatment, which is then multiplied by the duration of treatment effect to provide the number of QALYs gained. QALY ranges differ quite significantly, even amongst the most industrialized nations. Value-based pricing from double-blind, placebo-controlled trial results, demonstrating statistically significant beneficial effects on cognition and/or global function, would reward manufacturers for innovation whilst also enabling payer systems to remain solvent. Now that the first truly disease-modifying treatment for Alzheimer’s (lecanemab) has been approved, a second disease-modifying treatment (donanemab) appears to be heading for regulatory approval as well. The full value of these newest anti-dementia treatments may be understated when quantified under older pricing models and, hence, could unwittingly be a disincentive to further innovation. We now have disease-modifying and symptomatic relief treatments for Alzheimer’s disease to be included within the treating clinicians’ armamentarium and, when priced appropriately, access should be widely available whilst also encouraging further innovative anti-Alzheimer’s clinical research.

Paytm: Lack of a Cogent IPO Story?*

On 18 November 2021, Paytm, India’s leading digital payments and financial services company, went public, but its shares were listed at a surprising 9% discount from the initial price. This underperformance of Paytm’s highly anticipated ₹183 billion IPO, the largest in India, stunned the market despite the BSE Sensex index hitting an all-time high in October 2021 with a 50% increase over the previous year. While other unicorns like Zomato (thirty-eight times oversubscribed) and Nykaa (nearly eighty-two times oversubscribed) saw tremendous success in the capital market, Paytm struggled on the stock exchange. This raised questions about why a prominent brand with 3.33 billion customers could not effectively engage with stakeholders and failed to excite investors as Zomato and Nykaa did. Raghavendra Das, a communications consultant seeking to work with Paytm, assessed the company’s communication strategy and shared insights with MD and CEO Vijay Shekhar Sharma. The big question now is, what steps should Paytm and Sharma take next?

PRICING OF CALL OPTIONS USING THE QUASI MONTE CARLO METHOD

A call option is a type of option that grants the option holder the right to buy an asset at a specified price within a specified period of time. Determining the option price period of time within a certain period of time is the most important part of determining an investment strategy. Various methods can be employed to determine the prices of options, such as Quasi-Monte Carlo and Monte Carlo simulations. The purpose of this research is to determine the price of European-type call options using the Quasi-Monte Carlo method. The data used is daily stock closing price data on the Apple Inc. for the period October 1, 2021, to September 30, 2022. Apple Inc. stock options in this study were chosen because it is the largest technology company in the world in 2022. The steps taken in this study are to determine the parameters obtained from historical data such as the initial risk-free interest rate (r), stock price (, volatility , maturity time (T), and strike price (K). Next is to generate Halton’s quasi-randomized sequence and simulate the stock price by substituting the parameters by substituting the parameters. Then proceed to calculate the call option payoff and estimate the call option price by averaging the call option payoff values. The results showed that the call option price of the company Apple Inc. using the Quasi-Monte Carlo with Halton’s quasi-randomized sequence on the 1000000th simulation with a standard error of 0,045 is $90,163. The call option price obtained can be used as a reference for investors in purchasing options to minimize losses from call option investments in that period.

Medicare drug price negotiation: The complexities of selecting therapeutic alternatives for estimating comparative effectiveness.

Under the 2022 Inflation Reduction Act, the Centers for Medicare and Medicaid Services (CMS) are able to negotiate prices for topselling drugs in the Medicare Part B and D programs. In determining initial price offers, CMS will compare the prices and clinical benefits of the drugs subject to negotiation to the prices and clinical benefits of therapeutic alternatives. Despite the central role that the selection of therapeutic alternatives will play in the price negotiations, the available guidance published by CMS provides few details about how the organization will undertake this process, which will be particularly complex for drugs approved for more than one indication. To better inform the selection process, we identified all US Food and Drug Administration-approved indications for the first 10 drugs subject to negotiation. Using 2020-2021 Medicare claims data, we identified Medicare Part D beneficiaries using each of the 10 drugs. We extracted medical claims with diagnosis codes for each of the approved indications to report the relative treated prevalence of use by indication for each drug. We reviewed published clinical guidelines to identify relevant therapeutic alternatives for each of the indications. We integrated the evidence on the relative treated prevalence of indications and clinical guidelines to propose therapeutic alternatives for each of the 10 drugs. We describe challenges that CMS may face in selecting therapeutic alternatives.

Potential Development and Economic Analysis of Bioethanol Fabrication Design from Oil Palm Biomass with Ionic Liquid Choline Acetate Using SuperPro Designer (SPD) Software

The increasing use of energy causes the availability of energy, especially in Indonesia, to be depleted. This condition encourages humans to develop renewable energy sources, one of which is bioethanol, with the availability of abundant raw materials in nature. However, the development of bioethanol is still ineffective because it requires a long time and has high costs. Therefore, a design for bioethanol fabrication from oil palm plantation products with ionic liquid pretreatment using SuperPro Designer (SPD) software was developed. The bioethanol production process was simulated through three stages: pretreatment, enzymatic saccharification, and fermentation. Pretreatment was carried out using the ionic liquid Choline Acetate, after which the results of saccharification and fermentation were analyzed. The results of saccharification showed that around 138 g/L of palm oil was converted into sugar for fermentation. The overall result of the simulation system is that the fermentation process for 12 hours produced 92 g/L ethanol or 96% of the theoretical yield. Meanwhile, ethanol production through fabrication for energy can reduce ethanol prices by 30% from their initial price. This ethanol fabrication design is very supportive of optimizing biomass into bioethanol. Therefore, this design can be used as a recommendation for economical bioethanol production to obtain optimal results in bioethanol production.

Development and Economic Analysis of Bioethanol Production from Palm (Arenga Pinatta) Biomass with Ionic Liquid Pretreatment Using SuperPro Designer Software

Bioethanol has many functions both as a chemical, food and as a source of energy. The development of bioethanol production is currently leading to the residue of the main product. So that in this study the biomass of arena or Arenga Pinatta was used with a large availability of waste. Therefore, a performance and economic analysis was carried out in the production of bioethanol from palm biomass with ionic liquid (IL) using SuperPro Designer (SPD) Software. As a preparatory stage, the process of testing the characteristics of the biomass is carried out to obtain the most optimal composition of palm sugar in bioethanol production. After simulating the conditions according to the experimental process on the most optimal palm biomass composition, it was found that the most optimal Ionic Liquid (IL) and biomass ratio was at 0.5 g/g with the ethanol concentration obtained at 90.6 g/L at 13 hours which corresponds to theoretical yield of 96% conversion of biomass to ethanol. Meanwhile, the production of ethanol in a factory for energy can minimize the price of ethanol by 30% from the initial price. Thus, with the abundant availability of biomass, bioethanol production with aren biomass has the potential to be developed in Indonesia

DETERMINANTS OF UNDERPRICED INITIAL STOCK: A STUDY ON THE INDONESIA STOCK EXCHANGE

In the company, the issuer also wants profit, so expect a high initial price. However, on the part of the underwriters on the contrary, they expect a low initial price because they are bound by the full commitment stock guarantee system that applies in Indonesia. This difference in interests causes the issuer to compromise a bit by setting a lower initial share price so that investors are interested in buying the launched initial shares. As a result, when conducting an initial public offering, the company has difficulty in determining the price because there is no reference so that there is a potential for underpriced shares to occur. This study to analyze the factors that influence the level of undepriced, which is focused on age, return on total assets, financial leverage and firm size. First, the test will be carried out partially with a t-test to test the effect of each factor on the level of underpriced initial shares. Furthermore, the test will be carried out simultaneously with the F-test, namely to test the effect of the four factors together on the level of underpriced initial shares. The population in this study are companies that offer their initial shares on the Indonesia Stock Exchange and have underpricing stock values. The results show that company age has a positive effect on underpriced initial shares, while the return on total assets, financial leverage and firm size variables get the opposite result.

The impact of consumer expectations and familiarity on deceptive pricing in advertising: a view from drip pricing practice

Drip pricing practice, which involves promoting a seemingly low initial price and then introducing add-on price components without upfront disclosures, is commonly seen as a deceptive advertising practice that can lead to negative associations. Here, we provide an alternative perspective by investigating that whether consumers form positive or negative opinions about drip pricing depends on their expectation of encountering it and their overall familiarity with this practice. That is, this research reveals that when consumers’ general familiarity with drip pricing is low, higher expectations of drip pricing create greater perceptions of price fairness and purchase intentions. Moreover, our findings indicate that higher consumer expectations of drip pricing lead to positive attributions and evaluations of the detailed pricing information, resulting in higher perceptions of price fairness, which, in turn, increases purchase intentions. Further, we show that when consumers have high expectations of encountering drip pricing, they evaluate ­pricing information more positively and deception less harshly, resulting in greater purchase intentions than when they do not expect it.