Price Markup Research Articles

Optimal Pricing Design for Coordinated and Uncoordinated IoT Networks

An Internet of Things (IoT) system can include several different types of service providers, who sell IoT service, network service, and computation service to customers, either jointly or separately. A deep understanding of complicated coupling among these providers in terms of pricing and service decisions is critical to the success of IoT networks. This paper studies the impact of the provider interaction structures on the overall IoT system with heterogeneous customers. Specifically, we first study a generic IoT scenario with three interaction structures: coordinated, vertically-uncoordinated, and horizontally-uncoordinated structures. Despite the challenging non-convex optimization problems involved in modeling and analyzing these structures, we successfully obtain the closed-form optimal pricing strategies of providers in each interaction structure. We further extend the analysis to a specific IoT scenario with local computation capability (e.g., Internet of Vehicles (IoV)). We prove that the coordinated structure is better than two uncoordinated structures for both providers and customers, as it avoids selfish price markup behaviors in uncoordinated structures. Between the two uncoordinated structures, when customers' demand variance is large and utility-cost ratio is medium, vertically-uncoordinated structure is better than horizontal one for both providers and customers, due to the complementary providers' competition in horizontally-uncoordinated structure. Counter-intuitively, we identify that providers' optimal prices do not change with their costs at the critical point of customers' full participation in the vertically-uncoordinated structure.

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...

A study on inventory control strategies of fresh food supply chain considering advertising delay effect

PurposeThe existence of the advertising delay effect and its impact on supply chain operations have been demonstrated in the current study. Therefore, this study develops a timely inventory control strategy for the fresh produce supply chain to address the advertising delay effect in the fresh produce supply chain.Design/methodology/approachThis study proposes a game model based on the Nerlove-Arrow time delay differential equation and Pontryagin's maximum principle. Through comparative analyses of the optimal equilibrium strategies, the authors compare the optimal equilibrium strategies, product goodwill and optimal inventory trajectories for suppliers and retailers under secondary replenishment decisions and decentralized decisions.FindingsThe authors find that (1) Only when the sales cycle meets certain conditions can the overall profit of the supply chain under the secondary replenishment decision be greater than that under the decentralized decision. As the price markup coefficient increases, the total profit of the supply chain first increases and then decreases. (2) With the increase in the delay time, the replenishment quantity during the initial period gradually decreases. After the delay time elapses, the inventory depletion rate under secondary replenishment decisions is faster than that under decentralized decision-making. (3) Although there is a continuously increasing maximum value of product goodwill with the increase in delay time, it becomes difficult to achieve this value for longer delays.Practical implicationsThe authors’ findings provide a theoretical basis for supply chain members of fresh agricultural products to select replenishment and inventory control strategies when adopting different levels of delay in advertising marketing.Originality/valueFirstly, this paper explains the impact of advertising delay effect on fresh produce supply chain from a dynamic perspective, and secondly, it provides guidance on advertising formulation and inventory replenishment for fresh produce retailers under the influence of advertising delay effect.

Are Firm Markups Boosting Inflation? A Post-Keynesian Institutionalist Approach to Markup Inflation in Select Industrialized Countries

ABSTRACT Starting in 2021, the current inflation process has spurred plenty of discussion in academic and policy circles. This paper studies the relationship between firms’ markups and inflation during the 2021–22 inflation surge in several industrialized countries. It begins by explaining markup inflation and its critics in the context of the current debate over the sources of inflation. Then it reviews the characteristics of markup inflation within the post-Keynesian theory of markup pricing and complementing it with the Institutionalist approach to inflation that distinguishes between basic inflationary pressures and propagation mechanisms. The second part assesses markup inflation for several industrialized countries using descriptive statistics and conventional econometrics. The main contribution falls in empirically estimating markups considering the contribution of material cost and controlling for changes in capacity utilization over time. It concludes that there is some evidence pointing at markup inflation and, importantly, the existence of markup inflation leads to rejecting any wage-price spiral.

Globalisation and the fall of markups

AbstractThis paper provides the evidence of a fall of markups of price over marginal costs in Poland over the period 2002–2016. Markups were calculated using a census of firms and the methodology proposed by De Loecker and Warzynski (2012; American Economic Review, 102(6)). The fall of markups is robust to several empirical identification strategies. Moreover, the decline of markups is not related to changes in a sectoral composition and firms demography and is most severe in exporting firms. Our empirical results relate the fall of markups to the globalisation and the emergence of the Global Value Chains. We show that an increasing reliance on imported components in production, together with a rising concentration of domestic firms on export markets are the main factors behind the observed compression of markups. We also document a hump‐shaped (U‐shaped) relationship between foreign value added in exports (distance from final demand) and markups.

BUSINESS CYCLES WITH CYCLICAL RETURNS TO SCALE

AbstractWe study business cycles with cyclical returns to scale. Contrary to tightly parameterized conventional production functions, we empirically identify strong input complementarity that leads to procyclical returns to scale. We, therefore, propose a flexible translog production function that allows complementarity‐induced procyclical returns to scale. We integrate this function into a standard medium‐scale dynamic stochastic general equilibrium model. Our estimated model with input complementarity (i) features procyclical returns to scale and acyclical price markups, (ii) better matches the cyclicality of factor shares, and (iii) significantly decreases the contribution of markup shocks to output fluctuations relative to those of the standard model.

Sectoral implications of policy induced household credit expansions

This paper analyses the sectoral implications of household credit expansions in a two-sector open economy model. In the model, policy-induced expansion in banks’ willingness and ability to lend to households results in new lending, boosting aggregate demand and average wages in the nontradable sector. Under fixed relative wages and mark-up pricing in the tradable sector, wage pressures translate into inflationary pressures. The inflation-targeting central bank increases the policy rate to contain inflationary pressures. This intervention causes a real exchange rate appreciation, followed by a reduction in international competitiveness and a contraction of the tradable sector output. This way, the model illustrates that consumer credit expansions can trigger premature deindustrialisation, shifting the sectoral structure away from the high-productivity tradable sector towards the lower-productivity nontradable sector. Key macroeconomic developments from the Turkish economy between 2002 and 2013 are presented to motivate the model.

Wealth effects, price markups, and the neo-Fisherian hypothesis

The present paper thoroughly investigates the occurrence of positive comovement between inflation and the nominal interest rate conditional on a nominal shock — the so-called neo-Fisherian hypothesis in a New Keynesian framework. By introducing Jaimovich–Rebelo (JR) consumption–labor nonseparable preferences into an otherwise standard New Keynesian model, we show that neo-Fisherianism depends on the extent of wealth effects in households’ labor supply decisions. Neo-Fisherianism appears more prominent in economic environments with weaker wealth effects in labor supply (in particular for Greenwood–Hercowitz–Huffmann preferences where wealth effects are absent), smaller price-to-wage markups (for which the steady state is less distorted), and smaller real wage rigidity. Following a permanent interest rate shock, the neo-Fisherian hypothesis is guaranteed to hold regardless of the utility preferences or degree of real wage rigidity. A more prominent presence of endogenous capital works in favor of neo-Fisherianism. Finally, the stabilizing properties of Taylor rules under JR preferences are scrutinized.

The effect of changes in the terms of trade on GDP and welfare: A Divisia approach to the System of National Accounts

AbstractWhat effect, if any, do changes in the terms of trade have on the level of output (GDP) or welfare? I examine this issue through two versions of a textbook, Heckscher‐Ohlin‐Samuelson (HOS), two‐good model of a small, open economy. In the first version both goods are for final consumption. In the second, one good is an imported intermediate input into the other. In both versions, economic theory suggests that an improvement in the terms of trade raises welfare (consumption) but leaves aggregate output (GDP) unchanged. I then show that a national income accountant applying the principles of the 2008 System of National Accounts (SNA) would reach the same conclusions. This follows from a continuous‐time analysis using Divisia index numbers. However in the case where imports are intermediate inputs and competition is imperfect, an improvement in the terms of trade does raise GDP: the size of the effect depends on the size of the markup of price over marginal revenue. I argue that the continuous time Divisia approach is the right framework for national income accounting, even though it can only be implemented approximately in practice. If the aim is to find the best approximation to the Divisia index, then the chained Fisher index (as used in the US and Canadian national accounts) or the chained Törnqvist are better approximations than is the chained Laspeyres (as used in Europe).

Spatial competition on rural bank efficiency: Evidence from Indonesia

This study empirically examines bank spatial competition within the rural banking setting of Indonesia. The specific focus is on bank cost efficiency. It presents a new competition measure based on two spatial variables: physical distances and Thiessen polygon market boundaries. This study uses panel data from a large sample of more than 1,000 rural banks using quarterly financial data of rural banks in Indonesia from Q1–2014 to Q4–2018. Parametric or stochastic frontier analysis of Model EN is used to handle the endogeneity in bank cost efficiency measurement. The results show that bank efficiency is higher for shorter distances between banks and larger boundaries. Overall, the results support the competition-efficiency hypothesis. It also helps the idea that banks have mark-up pricing (higher market power) and may choose to reduce their effort to maximize profit.

Private Payer-Negotiated Rates for FDA-Approved Head and Neck Cancer Immunotherapy and Chemotherapy Agents.

To quantify the price that private payers pay hospitals for head and neck squamous cell carcinoma (HNSCC) treatments and identify hospital-level factors associated with price variation. Cross-sectional study. Price transparency files. Files from the top 50 hospitals in otolaryngology according to the US News and World Report were analyzed between December 2021 and June 2022. This study analyzed the following Food and Drug Administration-approved HNSCC therapies: pembrolizumab, nivolumab, cetuximab, cisplatin, carboplatin, and paclitaxel. Twenty-four (48%) hospitals reported prices for at least 1 medication in our sample. Newer biologics were significantly more expensive than traditional chemotherapeutic agents. Given approved medication regimens, all biologics in our sample have similar annual costs. Price markups over acquisition costs ranged between 109% (pembrolizumab, nivolumab) and 530% for carboplatin. Across hospitals, prices varied the most for paclitaxel, the cheapest medication in our sample, and prices varied the least for pembrolizumab the most expensive medication in our sample. Hospital 340B status and geographic location in the northeast/west are associated with lower price markups. Price nondisclosure remains a significant problem among hospitals. Newer biological medications are more expensive when compared to traditional chemotherapeutic agents. Prices vary significantly across hospitals, with lower price markups observed in 340B hospitals as well as hospitals located in the geographic northeast and west. It remains to be seen if price transparency will lead to more uniform pricing or lower costs of treatments.

India at 75: Replete with Contradictions, Brimming with Opportunities, Saddled with Challenges

ABSTRACT: I present a perspective on where the Indian economy stands right now. I acknowledge the contradictions that have arisen given the divergent growth path of urban, formal or (stock-market) listed India relative to rural, informal or unlisted India. I also focus on the country's immense opportunities in expanding the digital footprint of finance to last-mile borrowers. I present novel facts on the rising industrial concentration, drawing out its historical evolution, the channels that have caused it to rise recently, and its implications for product price markups and inflation. I recommend that to restore industrial balance, India increase overall competition by reducing import tariffs and reduce the pricing power of its largest conglomerates. I also propose that to restore macroeconomic balance, India reduce fiscal deficit and public sector borrowing requirements as well as rein in inflation, address gaps in skills and education, and restore female labor force participation.

Prices, profit margins and intermediary market power: evidence from the matooke value chain in Uganda

PurposeThere is widespread belief that intermediaries in African agri-food value chains have disproportionate market power. In this paper, the authors examine this belief by uncovering the purchasing and selling prices, costs and profit margins by farmers, intermediaries and retailers in the matooke (cooking banana) value chain in Uganda, and by analysing the prevailing value chain and market structures, seasonal entry and exit dynamics and the trading relationships in the chain.Design/methodology/approachData for this study were collected along the trading routes from the main matooke producing districts in South-West Uganda (Kabarole, Bunyangabo, Bushenyi, Isingiro and Mbarara) to the main urban markets around the capital Kampala. A structured survey was administered with 383 producers, 172 collectors and wholesalers and 71 retailers. In addition, key informant interviews and focus group discussions were held.FindingsThe authors find that price mark-ups by intermediaries (selling prices minus purchasing prices) vary with the type of intermediary, season and location but generally reflect the costs of moving matooke down the value chain to the urban consumer. The authors do not find evidence for disproportionate market power among the intermediaries in the chain. Intermediaries enter and exit the market in peak and off-peak season, such that profits are kept in check. This seasonality does imply a small shift in market power in favour of farmers in off-peak season and in favour of intermediaries in the peak season.Research limitations/implicationsThe investigation concentrated on an important and relatively homogenous staple crop along its main trade route. More remote areas, where there is less of an abundance of matooke, might still be characterised by local monopsonies where intermediaries have more market power due to high search and transport costs. Similarly, (local) monopsonies might exist for products for which there is a smaller market (segment), for products with a stronger seasonal variation in supply and for more perishable products.Originality/valueWhile there is an important literature on the role of intermediaries in African agri-food value chains, the evidence on intermediary market power is scant. Beliefs on intermediary market power are largely based on anecdotal evidence from farmers or inferred from observed prices or market structures. The paper contributes in addressing this important knowledge gap by studying the matooke value chain in Uganda.

Markups, organic agriculture and downstream concentration at the example of European dairy farmers

AbstractA competitive environment, highly concentrated processing and retailing sectors as well as increasing decoupling of direct payments from production volumes and the area under cultivation incentivizes farmers to find alternative ways to improve their bargaining position towards downstream companies. This article explores the possibilities of organic agriculture to enhance the bargaining power of farmers along with the role of concentration in downstream industries. Using a dataset with more than 200,000 observations from approximately 40,000 dairy farms, I estimate markups of price over marginal cost in dairy farming as a measure of market power in the EU. The results show that organic farmers achieve a significant markup premium over conventional farmers. With increasing market shares of organic milk in total milk production markups of conventional farmers diminish whereas those of organic farmers are unaffected. Farm‐level markups decrease with increasing market shares of medium‐sized dairy processors and increase with increasing market shares of large processors. The presence of large multinational retail chains shows an adverse impact on farmers’ markups.

Uniform vs. retailer-specific pricing: How a supplier responds to the dominant retailers’ markup pricing strategy

This paper investigates how dominant retailers should choose appropriate markup pricing strategies (a fixed-dollar markup, or a percentage markup), and how their supplier responds by choosing wholesale pricing strategies (a retailer-specific wholesale pricing, or a uniform wholesale pricing). Our results show that, all other things being equal, the uniform wholesale pricing strategy weakens the position of the retailers in the supply chain and thus is more favorable for the supplier. Specifically, when both retailers choose the same markup scheme, it is better for the supplier to choose the uniform wholesale pricing strategy since it can lead a higher profit for himself. The uniform wholesale pricing strategy also benefits the whole channel and the end-consumers, but hurts the dominant retailers. When the two retailers choose different markup schemes, the best choice for the supplier will still be the uniform wholesale pricing scheme if the level of downstream competition is sufficiently high; otherwise, the supplier would prefer the retailer-specific wholesale pricing scheme. The preference of the retailer using fixed-dollar markup pricing is just the opposite as compared to that of the supplier, while the retailer using percentage markup pricing always prefers retailer-specific wholesale pricing. Besides, the uniform wholesale pricing is beneficial to the whole channel. After anticipating the supplier’s reactions, both retailers are better off choosing percentage markup pricing no matter which wholesale pricing strategy the supplier chooses and what the level of competition is. Therefore, the final equilibrium would be the case where the dominant retailers choose the percentage-markup variant and the supplier always responds by adopting the uniform pricing scheme no matter what the level of bcompetition is. This equilibrium enhances the supply chain efficiency and benefits the end-consumers since it leads to the highest channel profits and the lowest retailing prices. Moreover, under this equilibrium, the supplier gets better while the retailers get worse as the level of competition increases.

OPTIMALISASI PENCEGAHAN KORUPSI DALAM PENGELOLAAN DANA PENANGGULANGAN COVID-19 DI INDONESIA

The existence of Covid-19 has a socio-economic impact on Indonesian society. Therefore, the Government implemented policies to address the impact of Covid-19 on society. However, these efforts have weaknesses, namely the potential for corrupt practices, especially in the procurement of goods / services for the benefit of Covid-19 and the distribution of Cash Social Assistance in the community. This research is a juridical-normative legal research using a case approach and comparative approach. Then it is processed and analyzed qualitatively. The results of this study indicate that there are potential gaps in corrupt practices in the procurement of goods / services for overcoming Covid-19 and the distribution of Cash Social Assistance to the public. It started from the occurrence of conflicts of interest, bribes, price mark ups, deductions from recipients of Cash Social Assistance funds, and kickbacks. So the recommendation given is the need for LKPP collaboration with law enforcement institutions; optimization of the use of e-catalog, e-purchasing; strengthening the compliance of Ministries / Institutions / Regional Apparatus on LKPP recommendations; and the use of the article on money laundering for corporations, and the socialization of the prohibition on cutting Covid-19 funds by the village apparatus.

Uncertainty Shocks and Corporate Borrowing Constraints

In this paper, we study the effects of uncertainty shocks in a quantitative framework where firms in the corporate sector are constrained by credit. Specifically, we formulate borrowing constraints as a nested function that features both earnings and capital as alternative instruments for assessing credit worthiness, in line with recent trends in corporate finance. We find that the quantitative framework that incorporates only one instrument (capital or earnings) in the borrowing constraint falls short in matching the business cycle properties of the US economy in terms of the behavior of output, inflation, and the price markup which are an essential part of the literature on uncertainty shocks. Rather, a hybrid formulation of the borrowing constraint which accounts for both capital and earnings helps us bring the results in the quantitative model closer to the data.

Pricing and green promotion decisions in a retailer-owned dual-channel supply chain with multiple manufacturers

This paper studies the pricing and green promotion effort decisions in a retailer-owned dual-channel supply chain consisting of multiple manufacturers and one retailer. Specifically, we consider the general version of the problem where multiple inter-correlated products are sold through both the online and the offline retail channels, and customer demands are jointly affected by product retail prices and green promotion efforts. With the objective of maximizing the members’ profits, game theoretic models are built to obtain the optimal decisions on wholesale prices, retail price markups and green promotion efforts under different power structures including manufacturer-Stackelberg, retailer-Stackelberg, Nash and integrated power structures. For several important special cases, explicit analytical relationships among optimal decisions and corresponding profits are established. For the more general settings, extensive numerical experiments are conducted to compare the system performance across different power structures. Our results indicate that the individual and overall profits are primarily driven by demand sensitivity to retail price. An increase in demand sensitivity will result in higher profits for all members at equilibrium. Our research also indicates that, regardless of power structures, the overall profit can also be driven up by increased product variety. For greening promotion efforts, the research reveals that the increase in the costs will have greater impactson the profit of the retailer than the manufacturers. Finally, our results demonstrate that being a Stackelberg leader is always advantageous if the objective is to optimize one’s individual profit,. But the significance of such an advantage is affected by the product independence. This paper extends the scope of existing studies by considering multiple correlated products in retailer-owned dual-channel supply chains, and rationalizes members’ pricing and green promotion effort decisions under competition.

Design of red chili commodity pricing using the BPMN approach and Sugeno's fuzzy inference system

Red chili is Indonesia's leading commodity. Red chili is a raw material for various food products, cosmetics, pharmaceuticals and others. Fluctuations in the availability of red chili commodity supply affect the price of red chili commodity products. Pricing can occur because of supply and demand. Un­cer­tain conditions also influence pricing due to fluctuations in raw material prices, ultimately affecting the price of carrageenan products. This condition makes price determination very difficult. Therefore, this study aims to analyze and design a pricing mechanism and determine the optimal margin in the red chili commodity marketing system. This study uses a systems analysis and design approach. Input-process-output (IPO) diagrams describe system requirements. Industrial business processes are described by the Business Process Model and Notation (BPMN) ver. 16.0. Meanwhile, to determine the optimal margin, Sugeno's fuzzy inference system approach is used by simulating the model in 3 margin scenarios: pessimistic, moderate, and optimistic. The simulation results were tested using the MAPE test, in which the results were compared between fuzzy price results and markup prices using markup values of 20%, 25%, and 30%. The analysis results show that the price is determined by demand and supply. The price obtained from the formulation of the Sugeno fuzzy model shows an optimal margin of Rp. 16,600.

Efektifitas Pengadaan Bahan Makanan dalam Penentuan Harga Jual

This research focuses on the effectiveness of food procurement in determining the selling price at FPBS Bali hotel. Food procurement that affects the variance between standard food costs and actual food costs will affect the profit of the food and beverage department. This research uses a qualitative descriptive method, namely research that in the process uses systematic techniques to understand, reduce, process, and draw conclusions from qualitative data collected based on interviews, and observations. The results showed that: the purchasing department purchases food ingredients not competitively but based on supplier loyalty. Receiving food ingredients lacks quality and quantity checks in accordance with the standard purchase specifications set by the hotel. Food storage activities have not fully run properly such as not paying attention to temperature and the use of the FIFO method. The recording of food expenditure from the store has not been maximum using the storeroom requisition (SR). Determination of the selling price of food mark-up pricing approach, namely setting the price of the product by taking into account all material costs and the expected profit level has not been used for the entire food menu.