Price-setting Strategies Research Articles

The Effect of Anchoring Bias on the Estimation of Asking and Transaction Prices in the Housing Market

Abstract This paper investigates the anchoring bias in the real estate market, focusing on the impact of uninformative random values on price estimations. Through a randomized controlled trial, the study examines whether selective accessibility contributes to the anchoring effect and to what extent the bias is transmitted from estimated asking prices to transaction prices on the primary housing market. The study was conducted in 2023 among Krakow University of Economics students on the example of the Krakow housing market in Poland. A multiple regression model indicates that randomly assigned numbers serve as cues affecting price estimations, with potential differences of up to 10.5% of the asking price offered by a developer. Additionally, gender and decision-making competencies influence estimation patterns, suggesting varying attitudes towards price-setting strategies that can be implemented by developers. These findings contribute to understanding the complexities of decision-making in real estate markets and highlight avenues for further research.

Is Bitcoin ready to be a widespread payment method? Using price volatility and setting strategies for merchants

Is Bitcoin ready to be a widespread payment method? Using price volatility and setting strategies for merchants

Evaluating pricing strategies for premium delivery time windows

In the challenging environment of attended home deliveries, pricing delivery options can play a crucial role to ensure profitability and service quality of retailers. To differentiate between standard and premium delivery options, many retailers include time windows of various lengths and fees within their offer sets. Even though customers prefer short delivery time windows, longer time windows can help maintaining flexibility and profitability for the retailer. We classify pricing strategies along two dimensions: static versus dynamic price setting and whether an offer set can include one or multiple price points. For static pricing, we implement price configurations that reflect current business practice. For the dynamic pricing, we adapt routing mechanisms that consider the flexibility within the underlying route plan during the booking process and set delivery fees accordingly. To evaluate the pricing strategies under plausibly realistic conditions, we model customer behavior through a nested logit model. This model represents customer choice as sequential decisions between premium and standard time windows. We perform a computational study considering realistic travel and demand data to investigate the effectiveness of static and dynamic time window pricing. Finally, we offer managerial insights and an outlook into applying strategic analysis to decide on price setting strategies.

Value chain analysis of potato in Farta District of South Gondar Zone, Amhara National Regional State of Ethiopia

Potatoes are the world's most important root and tuber crop. It is grown in over 125 countries and consumed by over a billion people daily. Millions of people in impoverished countries rely on potatoes product to their survival. Today, developing countries are the world's major producers and distributors of potatoes and potato products. Potato can be effective produce for allowing smallholder families to achieve their food security. Ethiopia has probably the maximum prospective country for potato production. However, in Ethiopia, various factors influence potato production and commercialization. It is the main tuber crop produced in Farta District. Potato production and value chain status are not studied well. Hence the main aim of this study was to evaluate the value chains of potatoes in the Farta district, Ethiopia. 123 sample potato farmers were chosen using a two-stage random sampling technique in four kebeles. Descriptive, inferential, value chain approach and econometrics analysis were employed. In addition, Heckman's two-stage selection econometrics model was employed to analyze the determinants of potato market participation and sales quantity. Producers, traders, chain supports, chain enablers, and final consumers were the main value chain actors for potato in the study area. Wholesalers control the potato value chain due to their finances advantage. Probit model estimation result provides that: distance to the nearby market, family size, oxen owned by farmers, market information, land size allocated for potato production, and quantity of inorganic fertilizer were the significant variables affecting the decision to market participation positively except family size. The OLS estimation result provides that: the education level of the farmers, farming experience, the number of extension contact, the land size allocated for potatoes, and the quantity of inorganic fertilizer is the significant variables influencing the amount of potato market supply positively. The main constraints for potato production and commercialization in study area were: Shortage of improved seed, lack of capacity building training to the post-harvest management approach, price fluctuation, shortage of market information, absence of policy framework in price-setting strategy was produced and marketing constraints of potatoes. Therefore, the study suggests that; increasing access to farm inputs, introducing new and improved crop varieties, establishing suitable post-harvest management facilities. In addition, follow up misconduct practice for price-setting strategies, strengthening market information service, facilitating conditions that can promote the smallholder farmers for participating in the market and minimize those constraints which impede the complete value chain in potato production and development.

Research on Pricing Models and Strategies of Online Group-Buying

In recent years, the Online Group-Buying has entered a state of development in full swing. The particularity of the OGB platform compared with the traditional market determines that its marketing and price setting model must be different from the traditional market. Based on the summary of domestic and foreign scholars’ literature on the pricing and strategy research of group buying business models, this article analyzes various factors affecting group buying prices. Under various assumptions, parameters and variables, through mathematical calculation and analysis, the optimal price and maximum profit for the healthy development of the enterprise are obtained, and how the merchants on the group buying website should adopt corresponding price-setting strategies and profit models to made some suggestions.

How to Deal with Fakes in the Art Market? A Theoretical Model Exploring Labeling and Price-Setting Strategies at Auction

How to Deal with Fakes in the Art Market? A Theoretical Model Exploring Labeling and Price-Setting Strategies at Auction

Information Asymmetry and the Mutual Fund Market

The literature is still divided about the information asymmetry problems of actively managed mutual funds. This disagreement raises an issue about the conditions behind the existence of this market. Some authors support the existence of market clearing mechanisms, while others estimate that passive funds are a substitute for active funds and the higher fees charged for the latter are not justified. We contribute to this discussion by formalizing these two approaches in price-setting strategies in two subgames. To solve it, we resort to an “external body” with a defined role to coordinate investors and mutual funds. We find that, owing to the actions of the external body and the presence of sophisticated investors and a low-quality mutual fund, there are incentives to deliver high-quality service and the active mutual fund market is preserved.

Price-setting strategies and practice for medical devices used by consumers

Advancements in technologies, emphasis on preventive care, and increased health awareness led to a growing market of home health medical devices. This study examines how and why price-setting strategies are established for Home Health and Direct to Consumer (HHDTC) medical devices using a multiple case study methodology based on eleven SME interviews as primary data source. The theoretical framework of Neubert (Cent Eur Bus Rev 6(3):41–50, 2017a) is used for this study. Study results suggest that mainly market-based price-setting strategies and competition-informed price-setting practices and to a lesser extent value-informed price-setting practices are used for pricing decisions of innovative HHDTC medical devices.

The influence of pricing strategies on corporate valuation

This paper seeks to find a correlation between the valuation of software as a service (SaaS) companies and the price-setting practices and pricing strategies utilised. The focus is to assess the pricing techniques employed by the leading SaaS companies, and to identify a correlation with their corporate valuations. Financial data from 18 publicly traded companies was used to apply 14 different valuation methods. The purpose of this paper is to identify those pricing techniques that most influenced corporate valuations. This study discovered that there were identifiable correlations between the price-setting practices, the pricing strategies, and the pricing models. The insights uncovered as a result of this paper are important contributions to the valuation of SaaS companies as a whole, as well as to the pricing techniques utilised in the leading companies. Implications of the price-setting practices and pricing strategies are better understood in terms of their impact on company success.

Firm types, price-setting strategies, and consumption-tax incidence

We analyze price responses to large restaurant VAT rate reductions in two different European countries. Our results show that responses in the short and medium run were clustered around two focal points of zero pass-through and full pass-through. Differences between independent restaurants and chains is the key explanation for this pattern. While nearly all independent restaurants effectively ignored the tax reductions and left consumer prices unchanged, a substantial fraction of restaurants belonging to chains chose a rapid and complete pass-through. In the longer run, prices converged, but primarily through a price reversion among chain restaurants. The stark difference in price responses does not appear to arise because of different market characteristics such as location, initial price levels, meal types and restaurant segment.

Strategic pricing across the product’s sales cycle: a conceptualization

Establishing the initial price for a new product is one of the most important decisions a firm will make. Implementing and adjusting this price over the sales cycle of the new product are crucial decisions for both its short- and long-term success. A modification of the product life cycle (PLC) concept is presented to reflect one of the many alternative price-setting strategies available to the company. After justifying and illustrating the modified PLC pricing strategy, applications and limitations are presented and discussed.

An Online Convex Optimization Approach to Real-Time Energy Pricing for Demand Response

Real-time price setting strategies are investigated for use by demand response programs in future power grids. The major challenge is that consumers have varying degrees of responsiveness to price adjustments at different time instants, which must be learned and accounted for by demand response initiatives. To this end, an online learning approach is developed here offering strong performance guarantees with minimal assumptions on the dynamics of load levels and consumer elasticity, even when consumers are adversarial and take actions strategically. The developed algorithms can determine electricity prices sequentially so as to elicit desirable usage behavior and flatten load curves, while implicitly learning individual consumers’ price elasticity based on available feedback information. Two feedback structures are considered: 1) a full information setup, where aggregate load levels as well as individual price elasticity parameters are directly available, and 2) a partial information (bandit) case, where only the aggregate load levels are revealed. Fairness and sparsity constraints are also incorporated via appropriate regularizers. Numerical tests verify the effectiveness of the proposed approach.

Spatial Effects in the Bid Price Setting Strategies of the Wholesale Electricity Markets: The Case of Colombia

Weather conditions in Colombia vary greatly throughout the territory and therefore the location of electricity generating plants plays a key role in their bid pricing strategies. To account for these location-specific pricing strategies this paper estimates a Spatial Durbin Model (SDM) with monthly data gathered from the 17th largest hydraulic electricity generating plants of Colombia on bid prices, generation, energy inputs and positive reconciliation over the period January 2005-August 2015 and controlling also for the system marginal prices and the economy cycle. The paper reports three main results. First, firms bid prices are negatively affected by the energy inputs of the rivals, second they are unaffected by positive reconciliation payments to the rivals and third they are negatively affected by the generation amounts of the rivals. One potential policy recommendation of these results is the need to implement balancing markets to signal more efficiently the pricing strategies in these markets.

To Lead or to Follow? Market Entry and Pricing Strategies for SaaS Provider

Software as a service (SaaS) is becoming an attractive alternative to the on-premises software, due to its distinct advantage of lower implementation cost over traditional software. However, as an early entrant in the industry, the on-premises software provider has potential to retain its market share by locking in its customers with high switching costs. We incorporate consumer heterogeneous cost sensitivity into the game-theoretical model of a duopoly with sequential entry. We investigate the market equilibrium in price-setting strategies and characterize the conditions under which one provider acts as leader and the other acts as follower and under which both providers adopt simultaneous-move strategy. We find that it is not always optimal for the providers to set prices simultaneously. In a low switching cost environment, the unique equilibrium is the incumbent being leader and later entrant SaaS provider being follower. If the switching cost is in the middle range, the simultaneous-move strategy is dominated and the incumbent-follower/entrant-leader situation represents the unique Nash equilibrium, which results in a Stackelberg equilibrium in prices. In a high switching cost environment, it is never a good choice for the SaaS provider to be leader. Our finding also suggests that the SaaS provider should act as follower instead of leader if it expects to gain a market-share advantage.

PRICE SETTING PRACTICES IN GREECE: EVIDENCE FROM A SMALL‐SCALE FIRM‐LEVEL SURVEY

ABSTRACTThe paper documents the price setting practices followed by some 400 or so firms operating in Greece. Survey replies reveal a low percentage of firms changing prices with frequency higher than annual and staggering of price changes during the year. As to firms’ reactions to unexpected shocks, prices appear to adjust sluggishly to cost shocks with asymmetries in price adjustment across positive and negative shocks. Adjustments to increases in costs appear speedier than those to reductions in demand. The data confirm a result found for other countries: the existence of cross‐sectional variations in price setting strategies and in the extent to which prices are adjusted in reaction to unexpected shocks. The results suggest a positive association between, on the one hand, product market competition and, on the other hand, state‐dependent pricing, frequent price changes and the likelihood of a price adjustment following an adverse demand shock.

Inpatient Hospital Charge Variability of U.S. Hospitals.

The range of hospital charges for similar diagnoses show tremendous variability across U.S. hospitals. This charge variability remains unexplained. We aimed to describe hospital charge variability in the U.S. and examine its relationship to local health factors. This was a descriptive study of the 2011 Medicare Inpatient Charge data summarizing inpatient hospital charges billed to Medicare. This data was evaluated using 29 county-level measures of health status, health behavior, clinical access and quality, built environment, and socioeconomic status in a clustered, multivariate linear regression. 2871 U.S. hospitals registered with Medicare and with at least ten discharges for diagnosis-related groups (DRGs) of six common inpatient conditions. Inpatient hospital charges were assessed. No community health measures were associated with hospital charges. The one notable exception associated with higher charges was higher rates of uninsured status ($344.84 higher charges for every one-percentage point increase in prevalence (p < 0.001)). One variable was associated with lower hospital charges: the percentage of children living in poverty [$309.30 lower charges for every one-percentage point increase in prevalence (p < 0.001)]. Overall, hospital charges lacked an association with population health measures, and their variability remains largely unexplained. However, the association of higher charges with uninsured status raises concerns about hospitals' price-setting strategies, such as price discrimination and cost-shifting strategies that expose vulnerable populations to great financial risks.

Understanding marketing strategies with particular reference to small- and medium-sized hotel businesses in the United Arab Emirates

This study attempts to empirically investigate the marketing practices of the small- and medium-sized hotels in the United Arab Emirates, which has not been extensively researched in the context of the accommodation sector in Arab region. Findings from the survey and semi-structured interviews with owners–operators of small- and medium-sized hotels revealed that, to remain competitive in the hotel businesses, small- and medium-sized hotels owners–operators undertaken various marketing practices in terms of positioning, product, price setting, and promotional strategies. The research reported in this paper seeks to make a contribution to the understanding of marketing strategies in small- and medium-sized hotels specifically and, more generally, to the area of small- and medium-sized enterprises or entrepreneurial marketing.

Do retailers set optimal prices in the case of the retail gasoline market?

How should gasoline retailers respond to other competing retailers and to changes in commodity gasoline prices to set their own prices over time? This question opens the door to an important discussion on price-setting strategies in the retail gasoline market. Retail gasoline price data, both panel and time series, is of great interest in the economic arena since it allows the testing of many theories about price formation, oligopolistic pricing, and consumer search. In this study, we present results from a unique new dataset, including daily sales, cost, and price data from 100 retail gasoline stations in a western European country. With this data, we empirically test various economic models to confirm, in full or in part, some earlier results based on North American data. We discuss a special case in which we empirically fit a model where retailers set prices partly in response to local competitors' prices.

Tariff recommendations: A Panacea for the Portuguese water sector?

In Portugal, in the early twenty first century, the water utilities industry was still quite complex displaying considerable financial shortcomings. That issue occurred, mainly, at the retail level due to faulty rate setting practices, stressing, perhaps, arbitrariness and political influence in price-setting strategies. To cope with that situation, the water sector regulator published tariff guidelines to harmonize cost analyses, tariff structures and levels, creating a basis for comparison. The suggestion of two-part tariffs with increasing block rates seems to lack enough flexibility and proper supporting material. Thus, our analysis focuses on assessing whether the recommendations issued are able to achieve the proposed objectives through the suggested procedures, reviewing the structure proposed and possible adjustments.

Thailand's Long-Run Tourism Demand Elasticities

This paper estimates Thailand's long-run tourism demand elasticities for a set of origin countries by applying dynamic ordinary least squares. A detailed analysis of the potential competing destinations for each origin country is performed to ensure a precise coefficient for the substituting elasticity. A long-run static model of time varying parameter is then used to analyse the effects on the estimation of a potential structural change caused by the 1997 economic crisis and the subsequent change in exchange rate policy. The results show that there are different demand elasticities for each origin market and that own price elasticity is lower than substituting price elasticity for most origin countries. These findings indicate that price-setting strategies should be specific for each origin market and that information about prices in competing destinations needs to be considered. Moreover, the results show that there was a structural change in 1997 that severely affected the estimation.