Price War Research Articles

Study on complex dynamics for the waste electrical and electronic equipment recycling activities oligarchs closed-loop supply chain.

Nowadays, with more and more WEEE (waste electrical and electronic equipment) being abandoned, WEEE recycling activities are increasingly popular. In this paper, we build a closed-loop supply chain model and focus on the recycling behaviors of the members in this supply chain, which contains two manufacturers, the retailer, and the consumer. In the reverse chain, we set up dual channels and design two recycling methods: sell-back method and trade-in method. We use classical backward induction to run the model. And then we analyze the stability of the system and the impacts of some essential parameters by numerical simulation. The speed of the manufacture's decision adjustment has a significant effect on the stability of the model. Manufacturers should adopt a stable rather than radical price adjustment strategy in order to achieve stable profit growth in the whole supply chain and avoid a chaotic price war. Manufacturers should increase innovation investment in recycling technology to reduce the cost of remanufacturing products and improve the initiative in market competition. In the end, we adopt the parameter control method and the decision-making method to control chaos, and they both have a good control effect.

The Russia-Saudi Arabia oil price war during the COVID-19 pandemic

The COVID-19 pandemic damaged crude oil markets and amplified the consequences of uncertainty stemming from the Russia-Saudi Arabia oil price war in March-April of 2020. We investigate the impacts of the oil price war on global crude oil markets. By doing so, we use the daily futures and spot prices in three major crude oil markets – West Texas Intermediate, European Brent, and Oman – to perform a systematic analysis of the impacts of the oil price war on them. The event study method, a well-established analytical tool to measure the impacts of a given event on markets, is used in this study. The results indicate that information leakage plays an important role in the impacts of the price war. The outbreak of and truce following the price war have asymmetrical impacts on the markets; negative impacts generated by information leakage during the outbreak are generally more durable than the positive ones it generated during the truce. Furthermore, the magnitude of the impacts on futures markets is negatively correlated with the time-to-maturity of futures. Finally, negative crude oil prices affect West Texas Intermediate crude oil markets the most. Our findings generally show that market participants could perceive and assimilate market changes and adjust their expectations, which restrained the impacts that should have occurred within the oil price war.

Fine cartels

This paper studies a simple model of a repeated cartel that can punish using both voluntary fines and inefficient prices wars. The idea is to use the fines in response to noisy signals of bad behavior and back it up with threats of price wars in response to the easily observed failure to pay the voluntary fines. The model is shown to deliver the insights of modern repeated game theory in an empirically accurate and tractable form.

Analyzing important factors in e-commerce for sustainable industry

The rapid growth of e-commerce for sustainable industry in Indonesia leads to competition for customer acquisition. Instead of gaining loyalty, customers are trapped in a price war and take advantage to compare and choose the one with the best offer. This study aims to analyze important factors of an online retailer to determine customer loyalty in the productive age group. This study contributes to design a questionnaire that can be utilized in analyzing customer loyalty to a retailer in e-commerce (popularly known as the term e-tailer). The questionnaire can be distributed through the Internet to gather demography, population, and e-loyalty factors. Questionnaire design is proposed containing three parts: Part A – Demography, Part B – Targeted Population, and Part C - e-Loyalty Factors. While Part A records basic information and Part B validates, Part C records respondent’s assessment to an e - tailer. Therefore, the outcome delivers a data engineering method to help e-tailers determine important factors to gain customer loyalty.

The historic oil price fluctuation during the Covid-19 pandemic: What are the causes?

On 20 April 2020, the West Texas Intermediate (WTI) crude oil price dropped to negative levels for the first time in history. This study examines the factors underlying the historic oil price fluctuation during the Covid-19 pandemic. The autoregressive distributed lag (ARDL) bounds testing approach incorporating a structural break is applied to the daily series from 17 January to 14 September 2020 to analyze long-run relationships and short-run dynamics. The results reveal that increases in Covid-19 pandemic cases, US economic policy uncertainty, and expected stock market volatility contributed to the fall in the WTI crude oil price, whereas the fall in the global stock markets appears to significantly reduce the fall. Furthermore, the Russia–Saudi Arabia oil price war and speculation on oil futures are shown to play a critical part in the collapse of the oil markets. The findings are consistent with our expectations. Although it is reasonable to assume that the solution to this oil crisis is a pick-up in global oil demand, which will occur only when the novel coronavirus is defeated, this study proposes policy recommendations to cope with the current oil price crash.

MWEB: Growth strategy options for an internet service provider

Subject area of the teaching case: The case is particularly relevant for students studying elements of business strategy with an interest in strategic decision-making, competitive strategy, and growth strategy. The case leverages several strategic frameworks taught throughout business courses and illustrates a real-world application of these frameworks to support sound strategic decision-making. Furthermore, the case examines the relevance of sustainable competitive advantage and the linkages to the appropriate growth strategy for a business. It is recommended that this case be taught once students have covered the applicable theory and frameworks in class. Student level: This case is designed for business administration students, in particular MBA, EMBA, speciality Masters, or executive education students. Brief overview of the teaching case: MWEB is a leading first-tier South African internet services provider, with an operating history spanning over 22 years. The MWEB brand is a household name across South Africa, seen as one of the pioneers of the internet industry and accredited with bringing the internet to ordinary consumers across the country. The state of competition in the market, however, has intensified and MWEB's traditional operating model has not evolved fast enough to meet the changing landscape. The market is in the midst of a price war, to which MWEB has responded by reducing market pricing and offering attractive deals, undercutting all its competitors. The results have been positive; sales have increased and churn has reduced, but competitors have already started to follow. The dilemma facing CEO Sean Nourse and his management team is how to accelerate growth in a highly commoditised market with intense competition while ensuring the long-term profitability of the business. The case encourages the consideration of the strategic decision-making process by analysing the competitive landscape, evaluating the options, and reaching a decision on the most viable growth strategy for the business. Expected learning outcomes: To analyse the competitive landscape and the forces at play To conduct a competitor analysis, appraise long-term profitability in the industry, identify profitable strategic positions, and determine how MWEB may achieve and protect its competitive advantage To identify and analyse the key parameters that, in combination, represent a company's business model To critically analyse the contextual factors that are presented as business challenges, evaluating and understanding the impact and scale of these challenges To critically assess relevant growth strategy alternatives for MWEB and analyse the viability of the alternatives presented To conduct an informal valuation to determine a purchase price for an acquisition target for the business

Managing natural monopolies: interplay of the regulator and telecom companies in India

Learning outcomes The learning outcomes of this paper are as follows: to understand the characteristics of a natural monopoly such as telecommunications sector and impact of “network externality”; to understand the role of a regulator in maintaining a balance between competition and consolidation of telecom sector; to understand the importance of first-mover advantage in telecom sector and coping mechanism of late entrants; to understand different pricing mechanisms of “natural monopolies” that can be adopted to remain profitable; to understand social cost of price floor in telecommunications sector. Case overview/synopsis Indian telecom sector is going through a downturn where most of the private sector telecom service providers have reported huge losses, failed to pay adjusted gross revenue (AGR) dues and reported decline in average revenue per user over a period of 3–4 years. Fierce competition in the sector leads to rock bottom calling and data charges. Bharti Airtel benefitted for being the first mover in terms of market share but with entry of JIO in 2016, the service providers have entered a price war. As a result, service providers have requested Mr. R.S. Sharma, Chairman of Telecom Regulatory Authority of India (TRAI) to come up with a floor on calling charges and requested the government for a bailout package. Currently, Mr. R.S. Sharma, Chairman TRAI is facing a dilemma whether to regulate and come up with a floor on calling and data charges or leave the sector for market correction. Mr. Sharma can also recommend to amend the definition of AGR. Telecommunications sector exhibit the characteristics of a natural monopoly where there is a need of a regulator to introduce “competition for the sector” and “competition in the sector.” In India, TRAI is the regulatory body responsible for introducing “competition for the sector” by auction and “competition in the sector” by deregulating calling and data charges, maintaining at least three private and one public service provider, decreasing “switching cost” of the customers, etc. The case deals with the issues of why there is a need of a regulator in natural monopolies, how different chairmen of TRAI have successfully introduced competition “for” and “in” the sector, and how Indian telecom sector went through a downturn? What should TRAI do to maintain competition in the sector? Complexity academic level The case deals with the issue of managing telecommunications sector (a natural monopoly) by a regulator in the context of India. The regulator had successfully introduced “competition in the sector” and “competition for the sector.” This led to sharp increase in subscriber base and decrease in calling and data charges. Presently, fierce competition in the sector has left the service providers cash crunched. The case deals with the dilemma faced by the chairman of the regulatory body in India on whether the regulator should come up with a price floor or market correction. Study level: MBA, Executive MBA. Supplementary materials Teaching Notes are available for educators only. Subject code CSS 10: Public sector management.

A variable neighborhood search algorithm for the $$ (r{\mid }p) $$ hub–centroid problem under the price war

A variable neighborhood search algorithm for the $$ (r{\mid }p) $$ hub–centroid problem under the price war

Multi-outsourcing supply chain coordination under yield and demand uncertainties

As a popular production mode, outsourcing enables the cost saving for original equipment manufacturer (OEM) and the acquisition of advanced technology for contract manufacturer (CM). We consider a multi-outsourcing supply chain within the voluntary compliance regime. The game between one OEM facing uncertain demand and arbitrary CMs owning uncertain yields is modeled to study the interactions regarding lot-sizing decisions. A general method is developed to prove the concavity of profit functions, which is formidable to accomplish based on Hessian Matrix. The optimal ordering and production strategies are subsequently characterized. A revenue sharing with surplus purchase contract with great flexibility in parameter selection is proposed to coordinate the supply chain. We find that there exist threshold outsourcing prices beyond which the CMs are motivated to overproduce, otherwise they tend to produce in consistent with the orders. In a competitive market, price war is not a wise strategy for CM due to profit sacrifice. By contrast, if the selling price charged by the OEM is high, a smart CM can appropriately raise its outsourcing price because the order quantity difference among CMs is relatively small. Although supply stability improvement and outsourcing price reduction are both welcomed by the OEM, the latter is more important for it to consider in allocating orders.

Spillovers of the COVID-19 Pandemic: Impact on Global Economic Activity, the Stock Market, and the Energy Sector

In this study, we examine the effect of the COVID-19 pandemic on global economic activity, the stock market, and the energy sector considering the sizable damaging impacts in these crucial aspects. Our results, based on the structural vector autoregression (SVAR) model for the data from 21 January 2020, to 26 February 2021, indicate that the COVID-19 cases significantly and negatively impact all the endogenous variables such as Baltic dry index (BDI), MSCI world index (MSCI), and MSCI world energy index (MSCIE). Our results also reveal that of the three variables, the stock markets indices (MSCI and MSCIE) are comparatively more affected by COVID-19 cases. The findings imply that the stock markets are more sensitive to the COVID-19 pandemic than the real economy. The results further indicate that of the three variables, the MSCIE index is the most affected by COVID-19 due to two factors: one is the dwindling power consumption caused by COVID-19 and the other is the decline in oil price because of the Russia–OPEC price war. Our findings enhance the understanding of the spillover impacts of the global health crisis on economic activity, the stock market, and the energy sector. Moreover, our study offers insights for policymakers and governments into the relationship dynamics of COVID-19 that would help them be more cautious in taking preventive measures against the health crisis to save the economy, the stock market, and the energy sector from falling into a more deepened crisis.

How the fiscal and monetary policy uncertainty of China respond to global oil price volatility: A multi-regime-on-scale approach

In the beginning of 2020, significant economic recession and financial shocks directly caused by the oil price war and the outbreak of COVID-19 epidemic appear, making the connection between oil price and policy uncertainty a significant topic, especially for China, the largest emerging market and second largest oil consumer. With the monthly data of WTI oil price, China's fiscal policy uncertainty (FPU) index and monetary policy uncertainty (MPU) index from January 2000 to August 2020, this paper detailedly investigates how China's FPU and MPU respond to global oil price volatility in different oil price volatility regimes and time scales. The empirical results expose that: (1) China's FPU and MPU volatility would positively respond to WTI volatility in the low oil price volatility regime, while in the high oil price volatility regime, the FPU response is insignificant and MPU response is only significant and negative in the scale 3–4 (8–16 and 16–32 months); (2) Only in the middle-long term of low oil price volatility regime will the WTI volatility significantly respond to China's FPU and MPU volatility; and (3) The FPU and MPU volatility responses are more violent in high oil price volatility regime. Our diversified findings can be important reference for diversified market participants including policy uncertainty researchers, government policy-makers and global investors interested in the Chinese market.

Factors that contribute to managers becoming engaged in unintentional price war

Despite understanding that price wars should be avoided and consensus among the pricing managers in our study, there remains a high reported incidence of price wars. The literature is silent about what factors lead well-educated pricing managers into price wars despite their desire to avoid them. This qualitative inquiry involved semi-structured interviews with 25 pricing managers across five industries. Our findings confirm that pricing managers have a strong desire to avoid price wars and confirm that pricing managers frequently blame competitors for aggressive pricing action. Additionally, we identify several common characteristics among the study participants. Pricing managers do not recognize value adjusted price competition as a price war. Pricing managers modify the definition of a price war in order to ensure their own actions and circumstances do not fit their definition of a price war. Finally, practitioners lack a widely accepted definition of price war.

A Stackelberg game based two-stage framework to make decisions of freight rate for container shipping lines in the emerging blockchain-based market

To improve the operational efficiency, blockchain technology has been gradually applied into the container shipping industry. As an easier, faster, more efficient platform, blockchain can help to enhance efficiency through digitalizing and easing paperwork. That means, blockchain will make the container shipping market more transparent. Changes in market characteristics will bring a significant problem, how will container shipping lines make decisions in the emerging blockchain-based market? This paper developed a Stackelberg game based two-stage framework to solve the problems. The first stage describes the process of container shipping lines deciding whether to enter the blockchain or not. The second stage describes how container shipping lines decide freight rate in an emerging blockchain-based market. The Cournot game and Stackelberg game are used to solve the second stage model. Spread factor is introduced to reflect the influence of the initial strategy on blockchain strategy. The classical demand function is modified to distinguish the non-blockchain market with more gentle competition from the blockchain market with more intense competition. Numerical experiment is applied to testify this paper. Results show: (1) Entering into the emerging shipping blockchain can be both an opportunity and a challenge for container shipping lines. (2) The ability of filtering function in the low freight rate of shipping blockchain plays a key role in regulating the freight rate and preventing the price war. This paper can provide decision suggestions for shipping lines at the early stage of blockchain introduction.

Beyond Negative Prices: The Saga of the Commodity and Equity Market

The stock market is a dynamic and vibrant arena for both casual and professional investors. Oil has been a particular point of interest in recent news. In March 2020, during the COVID-19 pandemic, and after a series of disagreements within the OPEC+ alliance, an oil price war between Russia and Saudi Arabia took place, which caused prices to decrease drastically. Moreover, the demand for oil dramatically decreased because of the suspension of transportation and air travel. Prices kept dropping, and cost of storage became increasingly unattractive, to the point where traders were willing to pay to get oil taken off their hands. On 4/20/2020, for the first time in history, the generic first crude commodity contract dropped from $10.01 to $-37.63 recording a negative price, puzzling most investors. This unprecedented event shocked the stock market, and most average investors were perplexed on how to calculate returns on negative prices. Interestingly, there was a clear divergence between the equity and energy prices, where the former kept on rallying while the latter completely collapsed into negative territory. This paper pragmatically analyzes the reasons for this divergence between the two markets, the diversification benefit of investing in both assets simultaneously, and presents a “quantum mechanics” methodology to calculate returns when a price goes negative. We find that investors with oil exposure in their portfolios typically tend to outperform those who do not.

Leadership through differentiation: Hero’s journey with Niloy Motors in the motorcycle industry of Bangladesh

Learning outcomes This case study can be taught in the core courses on marketing management and strategic management at the postgraduate level management programmes. This case would facilitate students’ to appreciate the context of a business-level strategy in congruence with the firm’s corporate goals in an emerging market. This case study discussion will enable students to: understand and appreciate the opportunities and the nature of the emerging market, explain the strategic decisions that can impact the survival of the global brands in new markets, explain different types of business-level strategy and their appropriate application, synthesise various industry and market-related information into the selection and justification of any particular business-level strategy and learn the technique of perceptual mapping. Case overview/synopsis Hero MotoCorp Limited of India; the world’s number one motorcycle company by volume, established its second global manufacturing facility in Bangladesh in 2018 with the Nitol-Niloy Group. A sister concern, Niloy Motors Limited (NML), had been in charge of the marketing, distribution and sales of the brand “Hero”. Abu Aslam, as the Chief Marketing Officer of NML soon had to confront this fast-paced and highly competitive motorcycle market of Bangladesh. He needed to meet the corporate goal of becoming the market leader by the year 2025. On the one hand, Hero was comparatively a late entrant; on the other hand, the market accommodated almost all popular global brands such as Bajaj, TVS and Honda. The high growth economy with a rising middle class and a favourable government policy had made the Bangladeshi motorcycle industry quite lucrative for the global manufacturers. Upon its entrance, Hero found a price-sensitive market where it soon became number two by adopting the cost-leadership strategy. However, the incessant price-cutting by the players led to the price war, and every company was losing profit. The resulting situation had created a strong challenge for Aslam as achieving the market leadership through cost-leadership seemed to be an impractical strategy. Towards the end of the 2019–2020 sales-year, Aslam introduced a new variant of Splendor Plus to the entry cc segment with some new features and a slightly higher price. Receiving a significant positive customer response, Aslam was seriously considering sailing away from cost-leadership. Now, Aslam was in a dilemma as he needed to choose from the three alternatives of adopting the differentiation strategy, namely, differentiation, focussed differentiation and broad differentiation. Complexity academic level Not applicable. Supplementary materials Teaching notes are available for educators only. Subject code CSS 11: Strategy.

Nash Q-learning agents in Hotelling’s model: Reestablishing equilibrium

This paper examines adaptive agents’ behavior in a stochastic dynamic version of the Hotelling’s location model. We conduct an agent-based numerical simulation under the Hotelling’s setting with two agents who use the Nash Q-learning mechanism for adaptation. This allows exploring what alternations this technique brings compared to the original analytic solution of the famous static game-theoretic model with strong assumptions imposed on players. We discover that under the Nash Q-learning and quadratic consumer cost function, agents with high enough valuation of future profits learn behavior similar to aggressive market strategy. Both agents make similar products and lead a price war to eliminate their opponent from the market. This behavior closely resembles the Principle of Minimum Differentiation from Hotelling’s original paper with linear consumer costs. However, the quadratic consumer cost function would otherwise result in the maximum differentiation of production in the original model. Thus, the Principle of Minimum Differentiation can be justified based on repeated interactions of the agents and long-run optimization.

Russia-GCC Economic Relations: When Quality Matters more than Quantity

During the last five years, Russian relations with the GCC have developed on a largely positive trajectory. Even Moscow’s decision to leave the OPEC+ agreement and launch a price war with Saudi Arabia in March 2020 did not threaten the gains made by Russian diplomacy in the region. Following a cooling-off period in 2012-2014 caused by the negative reaction of the GCC States to the Russian support of the Assad regime in Syria, the overall rapprochement continued. When explaining the complex mixture of factors that are driving Moscow’s dialogue with the GCC member states regardless of occasional political turbulence they usually refer to the growing intensity of Moscow’s presence in the region, changing dynamics of the U.S. relations with Russia and the GCC, existing tensions between Middle Eastern countries as well as the transformation of GCC foreign policy vision. Yet, the economic factors usually remain underestimated. Consequently, this article will try to prove the importance of the economic factors for the current development of Russia’s relations with the Gulf States. It will also assess the prospects for continued economic cooperation between GCC capitals and Moscow including an analysis of the ability of the sides to bring these relations to a new qualitative level.

The Planning Of Temperature Monitoring System, and Humidity On Supply Chain potatos industry based on Web

The advancement of technology, facilitate businessmen in applying technological advances in overcoming problems. One of the them is the existance of a price war due to the abundance of crops’ harvest such as potatoes, chili, onion, and fruits, in particular area. Thus, causing prices to fall dramatically. Even, the farmer cannot sell their harvest product. The aim of this study was to create Planning Temperature Monitoring System and Humidity in the supply chain potatos indutry through online system based on web(website). Supervision of this will result in the value of temperature and humidity on each individual warehouse cold storage that will be sent through the web. Therefore, a plan for monitoring temperature and humidity in the warehouse potatos industry, designing performance of the system, analyzing their application on the web was made. The analog data is received by the receiver and read by Visual Basic 6.0 software to be translated into temperature values and humidity, then it is informed in real time. The result of this study is providing planning monitoring system where the harvest can be stored. As a result, when prices rise, the stored products in cold storage warehouses can be sold.

Online Transportation Price War: Indonesian Style

Thanks to the brilliant innovation of the expanding online transportation companies, the Indonesian people are able to obtain an affordable means of transportation. This three major ride-sharing companies (Go-Jek, Grab, and Uber) provide services which not only limited to transportation service but also providing services for food delivery, courier service, and even shopping assistance by utilizing gigantic armada of motorbikes and cars which owned by their ‘driver partners’. These companies are competing to gain market share by implementing the same strategy which is offering the lowest price. This paper would discuss the Indonesian online transportation price war by using price comparison analysis between three companies. The analysis revealed that Uber was the winner of the price war, however, their ‘lowest price strategy’ would lead to their downfall not only in Indonesia but in all of South East Asia.

Саудовская Аравия на мировом рынке нефти

The goal of the article is to analyze the role of Saudi Arabia in the world oil market and in the world economy for a long historical period. It is shown that strategically behavior of Saudi Arabia always was and continues to be subordinated to ensuring the stable supply of oil into the world oil market. Under the Saudi Arabia leadership OPEC aims at pursuing an economically rational and responsible policy, supporting the balance of the demand for oil and its supply thus allow¬ing to avoid deep and lasting oil price decline. Until the very recently an important factor impacting the formulation of Saudi oil policy was maintaining of strategic interaction with the US. The restructuring of the world oil market driven by the shale revolution and nearing peak of global demand for oil have created new challenges for Saudi Arabia oil strategy. The OPEC+ situational agreement enacted since 2017 by OPEC and non-OPEC countries to voluntary reduce levels of oil production temporarily allows to keep a supply – demand balance in the world oil market preventing from substantial drop in oil prices. At the same time the agreement opens opportunities for competitors, first of all American producers of tight oil, to maintain and expand export niches. Shale revolution created a situation when oil interests of the US and Saudi Arabia came into open conflict. For political and strategic considerations, a price war in order to crowd American oil producers with their relatively high production costs out of the market is not a feasible option for the Kingdom. Attempts to transform the state oil company Saudi Aramco into a mega supermajor utilizing on the global economic and financial potential have failed as the leading international banks and corporations avoided the company’s IPO. The failure of Saudi Aramco partial privatization is a signal of a false start of a company to open the Saudi economy to large-scale in-flow of foreign investment. Paradoxically the long-term perspectives of Saudi Arabia crucially depend on how effectively it will use in the coming 10–20 years oil export earnings for diversification of national economy outside the oil sector. Acknowledgements. The article was prepared within the project “Post-crisis world order: challenges and technologies, competition and cooperation” supported by the grant from Ministry of Science and Higher Education of the Russian Federation program for research projects in priority areas of scientific and technological development (Agreement № 075-15-2020-783).