Selling Decisions Research Articles

Competitive equilibrium convergence in a posted-offer market with extreme earnings inequities

We present the results of five laboratory posted-offer experiments in which the competitive equilibrium model predicts that all exchange profits are received by one side of the market, thus defining a boundary condition. Price converges to the prediction more slowly when buyers rather than sellers receive the exchange surplus, apparently due to the increased market power of sellers in this trading mechanism. A model of the seller's decision in this market is developed to explain this result. We also observe costly signalling and tacit collusion in our experiments.

Pricing and Selling Decisions in a Labor Surplus Economy

The forces influencing pricing and selling decisions in African markets were analyzcd. The Kendall Coefficient of Concordance was used to determine the unanimity in ranking in pricing and selling objectives among vegetable vendors in markets in the Casamance region of Senegal. Price spreads and net revenues were examined to determine the level of competitiveness in the market. The study concluded that not all vendors were in agreement with rankings in pricing and selling objectives and that the ordering of selling and pricing objectives varied according to marketing agents. The level of returns received by vendors was an indication that there was an absence of market exploitation and the frec entrance and exit of marketing agents resulted in volatility in market structure.

Pricing and Selling Decisions in a Labor Surplus Economy

Pricing and Selling Decisions in a Labor Surplus Economy

Are There Long Cycles in Common Stock Returns?

An enormous amount of empirical work has been directed toward understanding the nature of stock price movements. Early studies, such as those by Alexander [2; 3], Fama [10], and Fama and Blume [11], support the contention that stock price changes follow a random walk. Thus cycles that appear to exist are simply a statistical artifact. More recent efforts, namely Young [28], Greene and Fielitz [12], Praetz [24], and Renshaw [25], however, provide some evidence against this hypothesis and suggest that stock price changes follow some type of a cyclic time path.' Explanations for these contradictory findings rely on the way that information is disseminated to, processed by, and acted on by market participants. To date, three basic information-based scenarios have appeared in the literature: (1) not all information is of equal importance, (2) not all participants have the same information, and (3) not all participants are equal in their ability to process information. This latter scenario is the most recent and has been used by Heiner [13] to develop a theory of predictable behavior by constructing a competence-difficulty (C-D) gap construct. Kaen and Rosenman [16] extend Heiner's [13] work to provide an explanation for the presence of nonperiodic cycles in asset prices, especially the prices (and returns) of common stock. They maintain that, according to Heiner's theory, market participants differ in their ability in making the correct buy and sell decisions under uncertainty. In financial markets, the spread between the participants' competence in conjunction with the complexity of the information, i.e., the C-D gap, results in price changes in the same direction. If new contradictory information is of substantial import, directional change occurs. Since the arrival of new information is posited to a random event, the resulting periods of similar price change behavior appear to be nonperiodic cycles. Empirically, Kaen and Rosenman [16] support their contention by citing several studies that have used rescaled

A dynamic, policy oriented model of the regulated housing market: The Swedish prototype

The design and preliminary implementation of a dynamic, policy oriented model of the regulated housing market is presented. The model is developed in the context of the Swedish housing market institutions which combine nearly all features encountered in other nations. Free buying and selling by homeowners, black markets, swapping of dwellings and rationing of price controlled dwellings both by landlords and a public authority are included as explicit transaction options (with distinct costs) available to existing and newly formed households in the market. The model simulates a sequence of temporary annual equilibria which are obtained by balancing effective demands with effective supplies. Household mobility choices, landlords' selling decisions and the rationing of dwellings at fixed prices are derived from stochastic maximization resulting in multinomial or nested logit models of choice behavior. An aggregated preliminary 16-equation version is calibrated with partly real, partly guesstimated data for the Greater Stockholm region in the mid-seventies. Qualitative comparative statatics and income compensated policy simulations with this version illustrate some unintended effects of Swedish housing policy resulting from the manipulation of the income tax, an income tax dependent property tax and housing allowances. The model provides a tool whereby deregulating institutional changes which are potentially Pareto improving can be identified. If, however, current institutions such as the rationing of dwellings result in sufficiently lower transactions costs for households relative to the free market, then deregulation is not Pareto preferred.

THE SELL DECISION

Will Rogers said that it's easy to make money in the stock market: you buy a stock and hold it until it goes up, then sell it. But “if it don't go up, don't buy it.” Towards the end of last year the stock market as measured by the Dow Jones Industrial Average (DJIA) was at an all time high of 2691.49. Investment professionals of all levels of experience and points of view — as well as retail clients — were asking themselves on a daily basis, “how high is up?” On the assumption that the astute readers of this column made their buying decisions in July 1982, when the DJIA was languishing around 750 and before the bull market began its surge on August 13, 1982, we will consider the sell decision.

Capital asset prices in an oligopolistic market

The capital asset pricing model (CAPM) as developed by Sharpe (1964), Lintner (1965) and Mossin (1966) is essentially a model of general competitive exchange in the markets for securities. It relates equilibrium security prices to investors' attitudes towards risk and their estimates of security returns. Despite its great contribution to our understanding of security markets, there still remains a weakness in its assumption that all investors are price takers. Security markets are increasingly dominated by large institutions and the manner of price formation is extremely sensitive to the buy and sell decisions of these actors. According to Business Week (August 13, 1984), the holdings of institutional investors exceed $ 1 trillion, they control an estimated 60% of U.S. corporate stock and bonds, and "they can virtually set the price of any company's stock through the impact of their massive purchases or sales." On the average, institutions account for 80-90% of all daily trades. Almost 50% of the reported volume in 1984 were block transactions in which 10,000 shares or more were traded. (See Wall Street Journal , February 20, 1985.) Sometimes, too, some markets are thin, raising problems regarding the value of an investor's initial portfolio; the initial exchangeable wealth of a large investor is market determined and

Pricing Policies for Quantity Discounts

In this paper we analyze the seller's decision to offer quantity discounts to the buyer. We build on an existing model as follows. We first characterize the range of order sizes and prices which reduce costs for the buyer and seller, and develop related pricing schemes. The model is then extended to allow inventory carrying costs to be a function of price.

Noncooperative exchange using money and broker-dealers

This paper presents a model of exchange where a single commodity serves as a means of payment and trade must pass through designated brokers. Broker buy and sell prices, trader allocations, and broker profits depend on the buy and sell decisions of all the market participants, and the exchange problem is described as a noncooperative game. The existence of an equilibrium is established and bounds are placed on the price spread on each commodity. Finally, the properties of the noncooperative equilibria under replication are examined.

Optimum operation of a small power production facility

To help reduce the U.S.A.'s dependence on imported oil for electrical power generation, the 1978 National Energy Act established regulations to promote construction and operation of cogeneration and small power production facilities. Many of these facilities are presently under construction, with a great number planned. This paper examines the operation of a small power production facility with on-site generation and storage, on-site use, and connection to an electric utility grid system for the purpose of both selling excess power and buying power. It is assumed that the buying and selling price of electricity varies frequently during the day and that the relevant price and demand data may be accurately projected into the near future. With this system description, a mathematical model is formulated and solved by linear programming to obtain a series of periodic buy and sell decisions so as to maximize the profit from operating the small power production facility. Results are presented to illustrate the methodology for determining potential profits.

Contributions of Decision- Tree Methodology to a Farming Systems Program

During the past decade anthropologists in several cultures have used natural process or hierarchical decision-tree models to predict the actual choices of individuals. Decision trees have predicted with a high degree of accuracy selling decisions made by Ghanaian fish sellers, farmers' adoption decisions in Puebla, Mexico, farmers' land use patterns in Costa Rica, and farm families' choice of treatment for illness in Pichatero, Mexico. In each case where the method has been used, the predictability has been as high as 85% to 95% of the actual choice data used to test the model. Unfortunately, the method has not yet been used regularly by national or international agricultural research centers. The reason is that the decision-tree tool presupposes a farming system research and extension program in which the farmer as decision maker is directing the program. This paper, therefore, shows how one decision-tree model was used in a farming systems program at a national agricultural research center to provide ...

Timing of bond investments: success with the expectational band approach

A new practical method for buying and selling decisions of bond investments which has been applied successfully by the World Bank for three years.

The Emergence of the Theory of the Firm. From Adam Smith to Alfred Marshall.

The theory of the firm's production and selling decisions is traced from the eighteenth century until the death of Marshall. Some tentative judgments are proposed as to the goodness and badness of the principal strands in this development. Apart from the first chapter (devoted to method) and the final chapter (devoted to post-Marshallian developments and empirical evidence), the thesis consists of three studies based on Adam Smith, J.S.MiU, and Alfred Marshall respectively. Each of these writers is considered in relation to preceding and contemporaneous work. Adam Smith outlines a model in which the long-run equilibrium of resource allocation between industries requires that the rate of return on capital be equal among industries (making allowance for differences in agreeableness and risk). Monopoly is defined as an impediment to the resource flow which would otherwise bring the equilibrium about. Following The Wealth of Nations, writers increase the empirical content of this model by elaborations with respect to observed phenomena (J .S.Mill) end with respect to the time path by which equilibrium is approached (Marshall). An alternative approach to the theory of price is to classify markets according to certain structural characteristics and to derive equilibrium and stability conditions for each market structure. The multiplication of these models since the time of Cournot has robbed them, of empirical content. Further, the structural assumptions of the models seem to limit the outcomes of modelled behaviour to actions which do not: alter that structure.

Guidelines for Insurers in Pricing Deductibles

Properly pricing deductible may help insurers to meet business objectives such as minimizing adverse selection, eliminating small claims, maintaining risk charges, and minimizing policyowner dissatisfaction. Technical considerations-such as the nature of loss data, the effect of inflation, and the effect of deductibles on operating costs-impose constraints on pricing procedures. After analyzing these business objectives and technical considerations, this paper concludes that a deductible pricing decision may involve compromises among competing requirements and objectives. Furthermore, some of the accepted wisdom of deductibles-such as their effect in reducing nuisance claims-is opened to serious question. Although an insurer's problem of setting rate credits for deductibles is at least as complex and worthy of study as the insurance buyer's problem of selecting a deductible, the insurance seller's decision has not received the intensive analysis long focused on the buyer's problem. This paper seeks partially to correct this imbalance by setting forth guidelines insurers may follow rationally in pricing deductibles for property insurance coverages. Pricing guidelines emanate from two sources: an insurer's business objectives and technical considerations which underlie proper rate credits. To meet its business objectives, one of which presumably is an underwriting profit, an insurer should offer deductibles and set deductible credits which,

ESTIMATION OF TIME‐VARYING SYSTEMATIC RISK AND PERFORMANCE FOR MUTUAL FUND PORTFOLIOS: AN APPLICATION OF SWITCHING REGRESSION

THE PURPOSE OF THIS PAPER is to determine the degree of nonstationarity in the risk levels and performance measures of mutual fund portfolios and reconcile several observed inconsistencies in the literature concerning a bias in risk-adjusted performance measures. A necessary condition for the estimation of the Jensen [17, 18] risk-adjusted performance measure and any statistical inference conerning that measure is that the mutual fund's systematic risk remain constant over time.' This assumption is unsatisfactory because mutual funds, generally being actively managed, should have a changing level of systematic risk as a result of the buying and selling decisions of their managers. For example, if a manager can make better than average forecasts of future realizations on market factors, he is expected to adjust portfolio risk in anticipation of market movements. The level of portfolio systematic risk can be substantially changed in either direction by altering the proportions of high and low risk securities in the portfolio. The important point is that the risk level of a managed portfolio is a decision variable. We should expect to observe nonstationary risk levels2 of managed portfolios as a result of timing

The Lease or Sell Decision

* Much has been written in recent years on the lease or buy, or lease or borrow decision in capital budgeting. Almost all the discussion explores the lease alternative from the perspective of the buyer/lessee. Articles by Vancil [9], Johnson and Lewellen [3], Sartoris and Paul [6], Gordon [2], Bower [1], Ofer [5], and others focus on aspects pertaining to the correct lease/buy or borrow decision, the appropriate rate of discount for different revenue and expense items, and the appropriate cash flows to incorporate in the analysis. Moyer [4] extends the lease model by considering the investment tax credit. Among other things, he shows that the investment tax credit can materially affect the lease decision, since the lessor may retain the credit or pass it on to the lessee. Despite the vast amount of attention given to the leasing decision, little has been written about the lease or sell decision from the manufacturer's viewpoint, which this paper attempts to do. The manufacturer is often in a position to control the leasing decision, especially if the firm has a preferred market position. For example, Savin Business Machines Corporation recently switched from a policy of stressing sales to one that encourages more leasing, when it introduced longer lease plans and offered discounts from the usual rental rate without adjusting the purchase price

Trade Using One Commodity as a Means of Payment

A general model of noncooperative trading equilibrium is described in which prices depend in a natural way on the buying and selling decisions of the traders, avoiding the classical assumption that individuals must regard prices as fixed. The key to the approach is the use of a single, specified commodity as "cash," which may or may not have intrinsic value. The model, in several variants, is treated as a noncooperative game, in the spirit of Nash and Cournot. The rules of the game, including the price-forming mechanism, are independent of behavioral or equilibrium assumptions, which enter, instead, through the solutions of the game.

Some Notes on the Dynamics of International Economic Integration

In order to understand what happens when a number of countries join together in a customs union or a free trade area, one must start with the buying and selling decisions of the individual business firms. The average buyer may be assumed to be interested in a change of supply when $-\Delta D_{i}>\Delta I_{i}+\Delta C$ where Di is the direct purchase costs, Ii the indirect purchase costs which can be directly allocated to the product under consideration, and C other costs, which although they are not necessarily directly allocatable to the product in question, can be influenced by a change from one supplier to another. The sum of the last two items is called the costs of change. Similarly, the average selling firm may be interested in a new market alternative (j) when the expected increase in the total net-sales receipts (Σ i=1nSij) is greater than the costs of change, which in this case is equal to the sum of the increase of the total indirect marketing costs (Σ i=1nMij) and the other costs (Σ i=1nCi) $\Delta \sum_{i=1}^{n}S_{ij}>\Delta \sum_{i=1}^{n}M_{ij}+\Delta \sum_{i=1}^{n}C_{i}$ In both cases the costs of change will be different whether we consider (1) a change of product, but the new product is bought from or sold to a partner with whom the firm already has business connections, (2) a change of partner, but this partner is located in a country in which the firm is already doing business, or (3) a change to a new partner in a country where the firm has never done business before. The establishment of a customs union or a free trade area will affect not only the direct purchase costs or the total net-sales receipts, but also the costs of change. The effects may vary over time, and as between different kinds of products, different countries and different types of firms. They may also lead to different kinds of integration patterns. A statistical study of the Swedish import of engineering products after the creation of the EFTA illustrates that the kind of concepts and relationships developed may be of use for the formulation of specific problems for further research. May be also for a general understanding of the dynamics of the integration process itself.

Choosing a programming method

Choosing a programming method necessitates that the company examines its own policies and composition. The reports of other firms' programming efforts are helpful only where the same or similar problems exist and where the two companies are enough alike to make valid generalizations. Before inquiring into the specific differences of the programming methods, many firms have found it helpful to review their positions on three matters; (1) the topics they intend to program, (2) the priority among these topics, and (3) the available financial support for programming. Some firms approach deciding what topics to program by asking, ‘What are the activities within this company in which programming would produce the greatest result?’ For example, many retail stores have chosen their basic sales systems as the lead‐off topics because they feel that the crucial sell or no sell decisions are most affected by the sales person's approach and knowledge of selling. On the other hand, in a chemical company where safety is a key problem and one mistake could kill many people, programming safety techniques will have top priority. Closely related to this profit or necessity approach to programming is the question of how much the company has to invest and over what time period. Purchasing 500 programs which cost $20 each means a direct outlay of $10 000 plus the indirect costs of training wages and support personnel once the programs are put into use.

A Note on the Multi-Commodity Warehouse Problem

The warehouse problem requires the determination of a sequence of buy and sell decisions at discrete points in time. By equating points in time and points in space, the warehouse problem can be identified with a special case of the shortest-route problem. In the present note a special matrix formulation is employed to yield simple solutions to both problems. An example is included to illustrate the method.