Market Demand Function Research Articles

Uncertain green product supply chain with government intervention

Green product supply chain management is increasingly becoming a new trend due to the growing awareness of environmental issues and the continuous development of industrial eco-processes. In this study, a two-echelon supply chain with government intervention involving a single manufacturer and a single retailer is examined. Due to the lack of actual data, the market size, price elasticity, demand function, and production cost are assumed to be unreliable variables. On the basis of various risk attitudes, the uncertain expected value, optimistic value, and mini–max chance constraint game theoretic models are developed. Equilibrium decisions for different planning models are derived. An analysis of equilibrium decisions and profits is conducted through numerical experiments examining the effects of confidence level, government intervention, green level, and price sensitivity. Based on the results of the data analysis, it appears that the manufacturer and retailer are able to reach different equilibrium decisions by adopting distinct risk attitudes. Furthermore, government intervention can facilitate the coordination of parameter-based decision-making and supply chain conflicts.

Rice Marketing Systems Model to Strengthen Institutional of Rice Marketing in Lampung Province Indonesia

A marketing system is efficient if it is able to deliver production results to consumers at the lowest possible cost and relatively even margins to the actors involved. But in reality, when production is in surplus while demand is not, it causes the market mechanism to produce price distortions. This study aims to analyze the rice marketing system with an organizational approach and market demand (market trends, market demand functions, and price elasticity). The data is obtained from the relevant authorities as well as from observations and internet searches. The results showed that the marketing actors for unhusked rice/rice consisted of collectors, rice millers, inter-district traders, and retailers where almost half of the profits were enjoyed by rice mills. The results of the market demand function analysis show that rice consumption will tend to decrease if there is an increase in rice prices. Consumers will divert some of their consumption expenditure on rice substitute products. The results of market trend analysis show that rice consumption has a positive trend over time. Keywords: Market Demand, Market Trends, Organizational Approach, Price Elasticity, Rice Marketing System.

Optimal Model Combination of Cross-border E-commerce Platform Operation Based on Fractional Differential Equations

Abstract This article takes cross-border e-commerce platform operation receipts as the research object. It uses fractional differential equations to construct a market demand function jointly affected by channel radiation range, price, and price differences. The study results show that the heterodyne effect of cross-border e-commerce guarantees the competitive position of the market incumbents of the cross-border e-commerce platform. The article also illustrates the effectiveness and practicality of the cross-border e-commerce supply and demand fractional differential matching decision-making method.

Optimal pricing and pricing policy selection for a B2C car-sharing platform during peak and off-peak hours

This study examines the optimal pricing and pricing policy selection for a business-to-consumer (B2C) car-sharing platform during peak and off-peak hours, where two pricing policies are evaluated, that is, fixed pricing policy and dynamic pricing policy. First, we construct the B2C car-sharing market demand function and the sharing platform’s profit maximization model under each pricing policy, and obtain optimal outcomes by solving the model, including service price, market demand, platform’s profit, consumer surplus, and social welfare. Then, through analysis, we reveal the effects of the pricing policy selection on the optimal outcomes. The results show that compared with the fixed pricing policy, implementing a dynamic pricing policy can increase the sharing platform’s profit, but decrease the consumer surplus and social welfare. Additionally, implementing a dynamic pricing policy can also increase the demand during off-peak hours and decrease the demand during peak hours.

Analysis of the stability and the bifurcations of two heterogeneous triopoly games with an isoelastic demand

<abstract><p>In this paper, we explore two heterogeneous triopoly games where the market demand function is isoelastic. The local stability and the bifurcations of these games are systematically analyzed using a symbolic approach, proposed by the author, of counting real solutions of a parametric system. The novelty of our study is twofold. On one hand, we introduce into the study of oligopoly games several methods of symbolic computation, which can establish analytical results and are different from the existing methods in the literature based on numerical simulations. In particular, we obtain the analytical conditions of the local stability and prove the existence of double routes to chaos through the period-doubling bifurcation and the Neimark-Sacker bifurcation. On the other hand, in the special case of the involved firms having identical marginal costs, we acquire the analytical conditions of the local stability for the two models. By further analyzing these conditions, it seems that the presence of the local monopolistic approximation (LMA) mechanism has a stabilizing effect for heterogeneous triopoly games with the isoelastic demand.</p></abstract>

Dynamic Sales Price Control Model for Exclusive Exquisite Products within a Time Interval

When information regarding the effective evaluation of the value of exquisite products is lacking, the market demand function for such products at a given time point is affected by the diffusion of historical transaction price information before the time point. This is because historical transaction prices play an active role in influencing the internal reference price (IRP) of customers, and the continuous diffusion of historical transaction price information leads to the continuous correction, adjustment, and updating of customers’ IRPs. Given the varying rates of such information diffusion, the speed at which customers adjust their IRPs also varies across individuals and contexts. By considering the exponential distribution of potential customers’ IRPs as an example to establish the dynamic demand function that considers the effect of historical transaction prices, this paper discusses the effect of different information diffusion rates on the demand function at a time point. On the basis of this demand function, a sales price control model that maximizes the discounted profitability for businesses in the patent term of an exquisite product is then constructed to provide businesses with an operation method to cultivate prices and increase profits.

With linear pricing, can profit‐maximizing monopoly output be socially efficient?

AbstractWe revisit the prevailing wisdom that a profit‐maximizing monopolist using linear pricing cannot produce socially efficient output. We show that when market demand function exhibits a flat portion, the prevailing wisdom may not be true. Such a “midway landing” in demand is consistent with weakly convex preferences, and many general demand functions such as any polynomials of degree three and higher. Thus, our analysis demonstrates that the output distortion resulting from linear pricing by a profit‐maximizing monopolist is demand specific. In general, neither monopoly per se nor linear pricing is the main reason for social inefficiency.

What are the overall implications of rising demand for organic fruits and vegetables? Evidence from theory and simulations

Abstract US consumers currently eat less fruits and vegetables (FV) than recommended by dietary guidelines. Inadequate FV consumption exists alongside rapid growth in demand for organic FV. Since the viable production area of FV is finite, organic and conventional FV are linked in production while serving as substitutes in consumption. Rising purchases of organic FV may have important implications for prices and quantities consumed in the conventional FV market. In this paper, we analyze the implications of rising demand for organic FV when organic and conventional FV are linked in supply and demand. More specifically, we use a multi-market equilibrium displacement model to examine the impact of rising demand for organic produce on prices and total quantities consumed of conventional and organic FV under two scenarios: product differentiation (i.e. organic versus conventional produce) while assuming that consumers have identical preferences that can be represented by a single market demand function for each good; and product differentiation with segmented markets, which allows for two types of consumers with unique demand functions. Both scenarios were simulated with and without an offsetting shift in demand for conventional FV. Our simulation results indicate that the increasing demand for organic FV may result in decreased consumption of combined conventional and organic FV, and that the direction of changes in FV consumption may vary by consumer segment. Under the most realistic assumptions, when one segment of consumers increases its demand for organic FV, this segment's overall consumption of organic plus conventional FV falls; the other segment's overall consumption rises. We provide sensitivity analyses and discuss caveats and directions for future research.

Environmental Taxation and Subsidization in an Oligopolistic Wholesale Market of Electricity with Intermittent Renewable Energy Sources

I investigate how environmental taxation and subsidization impact investment in non-polluting, intermittent renewable power plants such as wind power and photovoltaics in a wholesale electricity market where oligopolistic firms produce electricity from both polluting fossil fuel inputs and non-polluting renewable energy (RE), and a competitive fringe produces electricity only from non-polluting RE. An emission tax imposed on fossil fuel use such as carbon pricing (CP) is expected to discourage firms from operating the fossil fuel power plants, thereby promoting the substitution of RE for fossil fuel inputs. A subsidy provided to firms building and operating renewable power plants such as feed-in tariffs (FIT) and feed-in premiums (FIP) is expected to reduce setup costs, thereby promoting RE use. This study’s findings indicate that, among FIT, FIP, and CP, a unit increase in subsidy rate under FIT has the greatest impact on RE investment, while a unit increase in tax rate under CP has the smallest impact. Furthermore, if no correlation exists between available renewable power plants at different locations, the wholesale electricity price in an oligopolistic market with FIP or CP is less volatile than that with FIT. This result occurs because the market power of oligopolists facing FIP or CP mitigates the merit order effect, which indicates how much RE lowers the electricity price. The key insight from the model application to a wholesale electricity market in Japan is that the market demand function for wholesale electricity and RE investment costs are among the crucial factors in the achievement of welfare-optimal allocation through environmental taxation and subsidization.

A novel perspective on closed-loop supply chain coordination: Product life-cycle approach

Abstract Due to the dynamic nature of product life-cycle (PLC) and exclusive features of different phases, operational and long-term decisions such as supply chain coordination (SCC) may encounter some challenges. However, no studies have been done so far to evaluate the life-cycle impacts on SCC. In this regard, this paper studies a coordination approach in a closed-loop supply chain (CLSC) during the PLC including introduction, growth, maturity, and decline phases. The market demand and return rate functions are characterized according to the different phases as well as time-varying pricing decisions. First, the proposed problem is examined under the decentralized and centralized structures with life-cycle considerations. Then, a hybrid contract inspired by two-part tariff and joint collection cost mechanisms is developed to coordinate the channel. Finally, some numerical experiments and in-depth sensitivity analyses with a focus on different PLC phases are carried out. The results indicate that although the hybrid contract is able to satisfy a Pareto optimal solution in the life-cycle model, it does not necessarily work optimally in individual phases. On the other hand, contrary to the introduction phase, as the length of growth, maturity, and decline phases increase, the profits of channel players increase which implies that in order to design a more profitable PLC structure, a fundamental planning is needed.

With Linear Pricing, Can Profit-Maximizing Monopoly Output Be Socially Efficient?

We question the prevailing wisdom that a profit-maximizing monopolist using linear pricing cannot produce socially efficient output. We show that when market demand function exhibits a flat portion, the prevailing wisdom may not be true. Such a flat portion in demand is consistent with weakly convex preferences, and many general demand functions such as any polynomials of degree three and higher. Thus, our analysis demonstrates that the output distortion resulting from linear pricing by a profit-maximizing monopolist is demand specific. In general, neither monopoly per se nor linear pricing is the main reason for social inefficiency.

Generic regularity of differentiated product oligopolies

In oligopoly models with differentiated products, producers face a market demand function that reflects the preferences of consumers. However, typical assumptions on preferences place only weak restrictions on the shape of aggregate demand. This may result in profit functions that are not strictly quasiconcave, in best-reply correspondences that are not differentiable, and in equilibria that are not robust to perturbations. This paper establishes differentiability and robustness as a generic property: for an open, dense set of economies, best replies are differentiable in a neighborhood of equilibria, which is a precondition for comparative statics. All these economies have a finite number of equilibria in pure strategies.

Statistical modeling of the natural gas prices in relation to demand, supply and economic growth indicators

Natural gas, a cleanest fossil fuel, has become more and more popular in recent periods because of its being used in commercial, industrial, power generation and residential applications. Because of its uses and economic implications, Natural gas prices are affected primarily by the market supply and demand functions. Factors like production, imports and storage inventory levels on the supply side influence gas prices. Increases in supply results in gas prices down while decreases in supply tend to push gas prices up. Increased gas prices tend to encourage increased gas production, imports and sales while declining gas prices result in the opposite effects. Factors, like weather, temperature, economic conditions and petroleum prices, play a key role in increases/decreases in demand. Our aim in this study is to analyze the Canadian and US natural gas markets, and for the purpose of prediction, to fit appropriate models to establish the functional relationship between Natural gas prices and covariates like energy demand and supply and economic growth indicators. We evaluate the statements of codependence among various cofactors contributing to gas prices. We consider a novel methodology of modeling the functional relationship by applying various piecewise polynomials and study the efficiency by carrying the prediction error analysis.

Optimizing Operating Parameters of a Dual E-Commerce-Retail Sales Channel in a Closed-Loop Supply Chain

Currently, many consumers prefer online shopping via e-commerce platforms because of the shopping convenience and product diversity. Meanwhile, offline retailers provide retail services to cope with the competition from e-commerce platforms. Additionally, environment protection has been regarded to be equally important as economic growth in meeting the challenges of sustainable development goals. This work uses consumer utility selection theory to form the online and offline market demand functions in a dual-channel closed-loop supply chain considering consumers’ e-commerce preferences and retail services. Then, we further reveal the optimal system sales channel and coordination contract to acquire good economic and ecological benefits. We find the following: 1) As in practice, consumers’ e-commerce preferences and retail services simultaneously affect the purchasing and sales channels. 2) Since both consumers’ e-commerce preferences and retail service quality increase as service costs decreases, the recovery rate of used products increases, which contributes to improving the ecological benefits. 3) The “Double Marginalization” problem can reduce the operating efficiency of the decentralized system. Accordingly, we design a revenue-service cost sharing contract to solve this problem in a coordinated manner, and thus increase the economic and ecological benefits of the system. Consequently, all members can obtain profits in a win-win scenario by bargaining on the revenue rates and service costs.

The law of demand and the loss of confidence effect: An experimental study

The aim of this article is to examine the possibility that a market demand function (curve) might not be monotonically decreasing in its entire domain according to the consumer theory neoclassical as assumed by the law of demand (for normal goods). This may happen due to limited rationality of (some) consumers and the anchor price effect. When a price of a good decreases to some point, the amount demanded might stops increasing due to the loss of confidence effect: consumers’ unwillingness to buy a too cheap product. The existence of this effect was examined via questionnaire on a sample of 377 undergraduate university students from the Czech Republic, Ecuador and Spain. The main result of this experimental study is that the loss of confidence effect appeared at all three locations, which indicates that the law of demand may not be valid in its entire domain. Furthermore, the results of this study imply that a significant percentage of people make decisions of limited rationality even when facing a very simple task. In addition, statistically significant difference in rational behavior with respect to gender was found.

A stochastic network equilibrium model for electric power markets with uncertain demand

ABSTRACT We use the theory of stochastic variational inequalities to develop a network equilibrium model of the whole supply chain of electricity markets: power generation, supply, transmission, and consumption. In particular, we take into account the case where the market demand functions are not exactly known but are affected by some kind of uncertainty. A discretization and truncation procedure is used to numerically solve the stochastic variational inequality model. Monotonicity properties of the operator are investigated and the affine case is analysed in detail. Finally, numerical experiments show the impact of different probability densities of the random variables on the approximated solutions and the scalability of the proposed numerical method for real-world sized problems.

Dynamic Pricing in an Evolving and Unknown Marketplace

We consider a firm that sells a single type product on multiple local markets over a finite horizon via dynamically adjusted prices. To prevent price discrimination, prices posted on different local markets at the same time are the same. The entire horizon consists of one or multiple change-points. Each local market's demand function linearly evolves over time between any two consecutive change-points. Each change-point is classified as either a zero-order or a first-order change-point in terms of how smooth the demand function changes at this point. At a zero-order change-point, at least one local market's demand function has an abrupt change. At a first-order change-point, all local markets' demand functions continuously evolve over time, but at least one local market's demand evolution speed has an abrupt change. The firm has no information about any parameter that modulates the demand evolution process before the start of the horizon. The firm aims at finding a pricing policy that yields as much revenue as possible. We show that the regret under any pricing policy is lower bounded by CT^{1/2} with C>0, and the lower bound becomes as worse as CT^{2/3} if at least one change-point is a first-order change-point. We propose a Joint Change-Point Detection and Time-adjusted Upper Confidence Bound (CU) algorithm. This algorithm consists of two components: the change-point detection component and the exploration-exploitation component. In the change-point detection component, the firm uniformly samples each price for one time in each batch of the time interval with the same length. She uses sales data collected at the times that she uniformly samples prices to both detect whether a change occurs and judge whether it is a zero-order or a first-order change if it occurs. In the exploration-exploitation component, the firm implements a time-adjusted upper confidence bound (UCB) algorithm between two consecutive detected change-points. Because demand dynamically evolves between two consecutive change-points, we introduce a time factor into the classical UCB algorithm to correct the bias of using historic sales data to estimate demand at present. We theoretically show that our CU algorithm achieves the regret lower bounds (up to logarithmic factors). Our numerical study shows that our policy performs well in a wide range of market environments.

Distortionary tax and general equilibrium analysis of welfare maximized private and public goods consumption

There is a debate on economic efficiency and the improvement of economic welfare. In this research, I have fixed the value of rich and poor with equal weight with an assumption that the consumption tax is the source of government expenditure for public goods. This paper optimized improvement of equality and private consumption share of public goods with the prime revenue of consumption tax. This optimization process has also been analyzed in accordance with the theoretical assumption of Roy`s identity and Marshallian ordinary market demand function for justification of equity and welfare. Finally, this process compared implicitly to the process of Kuznets pattern economic development with taking assumption of distortionary consumption tax to penetrate the relationship between long term economic growth and economic welfare. The empirical evidence found in my earlier publication that consumption tax is welfare augmented in long run if the source of government expenditure is consumption tax to produce public goods. This welfare maximized general equilibrium evidences have potential opportunity of welfare augmented resource mobilization in a developing country where consumption tax is the source of prime revenue.Progressive Agriculture 29 (2): 178-185, 2018

Existence of Unique Equilibrium in Cournot Mixed Oligopoly

The properties of Cournot mixed oligopoly consisting of one public firm and one or more than one private firms have mostly been analyzed for simple cases on the basis of numerical calculations of the equilibrium values for a linear market demand function and linear or quadratic cost functions. In this paper, after proving the existence of a unique equilibrium in Cournot mixed oligopoly under general conditions on the market demand and each firm’s cost function, we derive conditions ensuring the existence of a unique Nash equilibrium for the mixed oligopoly where one public firm and at least one of the private firms are active in a general model of Cournot mixed oligopoly with one public firm and several private firms.

Nonparametric Demand Estimation in Differentiated Products Markets

I develop and apply a nonparametric approach to estimate demand in differentiated products markets. Estimating demand flexibly is key to addressing many questions in economics that hinge on the shape - and notably the curvature - of market demand functions. My approach applies to standard discrete choice settings, but accommodates a broader range of consumer behaviors and preferences, including complementarities across goods, consumer inattention, and consumer loss aversion. Further, no distributional assumptions are made on the unobservables and only limited functional form restrictions are imposed. Using California grocery store data, I apply my approach to perform two counterfactual exercises: quantifying the pass-through of a tax, and assessing how much the multi-product nature of sellers contributes to markups. In both cases, I find that estimating demand flexibly has a significant impact on the results relative to a standard random coefficients discrete choice model, and I highlight how the outcomes relate to the estimated shape of the demand functions.