Two-tier Pricing Research Articles

Two-tier price membership mechanism design based on user profiles

• The e-commerce platform’s two-tier price membership mechanism design is studied. • We investigate the optimal two-tier price membership mechanism. • Discuss two-tier price membership considering consumer behaviors. • The two-tier price membership mechanism can achieve a triple-win situation. E-commerce platforms have pioneered many innovative business models based on their strong big data capabilities and consumer profile technology. This paper studies the design of the two-tier price membership mechanism in e-commerce platforms, i.e., the price discrimination in membership fees for different consumer groups. We analyze this mechanism considering and not considering certain consumer behaviors, respectively. We surprisingly find that the entry thresholds of the two-tier price mechanism in four different scenarios coincide at the critical point of whether consumers will buy the membership. The entry threshold provided by the platform distinguishes high-value consumers. When not considering the reference price effect, the two-tier price mechanism will degenerate into a uniform-price mechanism. The high membership fee only acts as a reference price for high-value consumers. Finally, we discuss social welfare and show that a triple-win scenario can occur among the platform, members, and merchants when the cross-buying effect is strong enough.

A neo-Marxist anthropology of urban workers and peasant farmers in Thailand

This manuscript is an original cultural anthropological study that is based on fieldwork done by the principal investigator, Antonio L. Rappa, on groups of urban workers and peasant farmers of Bangkok, Chiangmai, and Pattaya from 1998 to 2016. The focus of this manuscript is on how these workers survive late modernity within the neoliberal capitalist world scenario. The fieldwork also showed the importance of materialism among Thai workers and how they remain trapped in giving up the surplus labor value of their work to the bourgeoisie (Marxian Theory). Since 1932 (the Siamese and since 1946), the Thai workers have been suppressed and exploited by the ruling elite (Power Elite Theory). Whether we use a Cultural Anthropological/Marxian, neo-Marxist Anthropological, or Power Elite theory (C. Wright Mills’ Theory) approach, it remains clear in 2022 that the Thai people still continue to be imprisoned by a desire for luxury goods and services (Thorstein Veblen). Then, there is the complication of religion. At least 93% of all Thai people are Theravada Buddhists and staunchly believe in worshiping the Buddha as well as in various superstitions. The remaining 5–7% are Muslims and Christians. It is only the Muslims who have consistently given political trouble to the Bangkok capitalists but the Muslims are not socialists or communists since they believe in the god known as Allah. Ever since the 1970s, Thailand came under serious threat from communism like many Southeast Asian states. King Bhumiphon Adulyadej (Rama IX) was already a deeply respected monarch and a virtual demi-God to the superstitious and animistic Thai Buddhists. Few Thais realized at that time that the King was also a well-read scientist knowledgeable in urban planning and agriculture. Rama IX applied the knowledge that he garnered from Switzerland and Cambridge, Massachusetts, toward building a new kind of thinking, called Self-Sufficiency Economy (SSE). Rama IX’s SSE was not unique to Thailand and commonly practiced to various effects in South Asia, the Far East, and Southeast Asia. Nevertheless, the king thought that the SSE would be a good way out for his people. He believed that if each Tambon or village could cooperate using existing resources, provincial assistance in agricultural knowledge, and the model-village concept, then the Thai people would be self-sufficient in many aspects. This was also known as the One-Tambon, OneProduct (OTOP) policy. This is itself a manifestation of the materialist cultural anthropologic of Thai culture itself. The manuscript concludes with an analysis of the dual pricing system or two-tier pricing system, and why the Thai people appear to support Thorstein Veblen’s Theory and C. Wright Mills’ Theory rather than any neo-Marxist theory of land distribution and property ownership.

Price mediated contagion through capital ratio requirements with VWAP liquidation prices

We develop a framework for price-mediated contagion in financial systems where banks are forced to liquidate assets to satisfy a risk-weight based capital adequacy requirement. In constructing this modeling framework, we introduce a two-tier pricing structure: the volume weighted average price that is obtained by any bank liquidating assets and the terminal mark-to-market price used to account for all assets held at the end of the clearing process. We consider the case of multiple illiquid assets and develop conditions for the existence and uniqueness of clearing prices. We provide a closed-form representation for the sensitivity of these clearing prices to the system parameters, and use this result to quantify: (1) the cost of regulation, in stress scenarios, faced by the system as a whole and the individual banks, and (2) the value of providing bailouts to consider when such notions are financially advisable. Numerical case studies are provided to study the application of this model to data.

A Neo-Marxist Anthropology of Urban Workers and Peasant Farmers in Thailand

This article is an original cultural anthropological study that is based on fieldwork done by the principal investigator, Antonio L. Rappa, on groups of urban workers and peasant farmers of Bangkok, Chiangmai, and Pattaya from 1998 to 2016. The focus of this article is on how these workers survive late modernity within the neoliberal capitalist world scenario. The fieldwork also showed the importance of materialism among Thai workers and how they remain trapped in giving up the surplus labor value of their work to the bourgeoisie (Marxian Theory). Since 1932 (the Siamese and since 1946), the Thai workers have been suppressed and exploited by the ruling elite (Power Elite Theory). Whether we use a Cultural Anthropological/Marxian, neo-Marxist Anthropological, or Power Elite theory (C. Wright Mills’ Theory) approach, it remains clear in 2022 that the Thai people still continue to be imprisoned by a desire for luxury goods and services (Thorstein Veblen). Then, there is the complication of religion. At least 93% of all Thai people are Theravada Buddhists and staunchly believe in worshipping the Buddha as well as in various superstitions. The remaining 5–7% are Muslims and Christians. It is only the Muslims who have consistently given political trouble to the Bangkok capitalists but the Muslims are not socialists or communists since they believe in the god known as Allah. Ever since the 1970s, Thailand came under serious threat from communism like many Southeast Asian states. King Bhumiphon Adulyadej (Rama IX) was already a deeply respected monarch and a virtual demi-God to the superstitious and animistic Thai Buddhists. Few Thais realized at that time that the King was also a well-read scientist knowledgeable in urban planning and agriculture. Rama IX applied the knowledge that he garnered from Switzerland and Cambridge, Massachusetts, toward building a new kind of thinking, called Self-Sufficiency Economy (SSE). Rama IX’s SSE was not unique to Thailand and commonly practiced to various effects in South Asia, the Far East, and Southeast Asia. Nevertheless, the king thought that the SSE would be a good way out for his people. He believed that if each Tambon or village could cooperate using existing resources, provincial assistance in agricultural knowledge, and the model-village concept, then the Thai people would be self-sufficient in many aspects. This was also known as the One-Thambon, One-Product (OTOP) policy. This is itself a manifestation of the materialist cultural anthropologic of Thai culture itself. The article concludes with an analysis of the dual pricing system or two-tier pricing system, and why the Thai people appear to support Thorstein Veblen’s Theory and C. Wright Mills’ Theory rather than any neo-Marxist theory of land distribution and property ownership.

Two-tiered pricing and ordering for non-instantaneous deteriorating items under trade credit

We develop an economic order quantity model for non-instantaneous deteriorating items with price dependent demand and trade credit. Our objective is to determine the optimal two-tiered pricing and ordering policies, where the two-tiered pricing means that the prices for the non-deteriorating period and the deteriorating period are different. We derive the expressions of the total profit under different situations and propose an algorithm to derive the optimal solutions. Through numerical analysis, we illustrate that the two-tiered pricing is better than one-tiered pricing. Some other managerial insights are also derived by the numerical examples.

Does garbage pricing increase the immoral disposal of household waste?

ABSTRACTSome empirical studies have attempted to clarify the mechanism of illegal dumping by examining the degree to which per-bag pricing plays a role. However, previous research on the behaviour of avoiding paying a charge for waste collection has tended to neglect so-called ‘immoral disposal,’ which is less risky than illegal dumping because there is no legal penalty. In this study, we define immoral disposal as the dumping of waste in a manner that is immoral but not illegal. To detect the existence of immoral disposal, we apply a spatial econometric approach, namely an extended panel spatial Durbin model, to identify the actual spillover effect of garbage pricing in neighbouring municipalities on immoral disposal from the total waste. A major finding of this study is that immoral disposal exists in unit-based pricing, two-tiered pricing, and fixed pricing.

YIELD UNCERTAINTY AND MILK SUPPLY RESPONSE IN TWO-TIER PRICE SYSTEMS

AbstractIn two-tier price systems, yield uncertainty creates incentives to overproduce quantity-restricted outputs even when prices for surplus output are very low. These incentives arise from precautionary motives against expected losses from quota shortfalls. Using an approach augmented for multiple input applications, the likelihood of excess production and the relative importance of price changes in different markets are estimated for Icelandic dairy farms. The results indicate that the average farm plans to exceed its quota, and price changes in the surplus milk market are approximately three times more effective in generating supply response than price changes in the quota milk market.

Welfare gains of the poor: An endogenous Bayesian approach with spatial random effects

ABSTRACTWe introduce a Bayesian instrumental variable procedure with spatial random effects that handles endogeneity, and spatial dependence with unobserved heterogeneity. We find through a limited Monte Carlo experiment that our proposal works well in terms of point estimates and prediction. We apply our method to analyze the welfare effects generated by a process of electricity tariff unification on the poorest households. In particular, we deduce an Equivalent Variation measure where there is a budget constraint for a two-tiered pricing scheme, and find that 10% of the poorest municipalities attained welfare gains above 2% of their initial income.

Heuristic Optimization of Consumer Electricity Costs Using a Generic Cost Model

Many new demand response strategies are emerging for energy management in smart grids. Real-Time Energy Pricing (RTP) is one important aspect of consumer Demand Side Management (DSM), which encourages consumers to participate in load scheduling. This can help reduce peak demand and improve power system efficiency. The use of Intelligent Decision Support Systems (IDSSs) for load scheduling has become necessary in order to enable consumers to respond to the changing economic value of energy across different hours of the day. The type of scheduling problem encountered by a consumer IDSS is typically NP-hard, which warrants the search for good heuristics with efficient computational performance and ease of implementation. This paper presents an extensive evaluation of a heuristic scheduling algorithm for use in a consumer IDSS. A generic cost model for hourly pricing is utilized, which can be configured for traditional on/off peak pricing, RTP, Time of Use Pricing (TOUP), Two-Tier Pricing (2TP) and combinations thereof. The heuristic greedily schedules controllable appliances to minimize smart appliance energy costs and has a polynomial worst-case computation time. Extensive computational experiments demonstrate the effectiveness of the algorithm and the obtained results indicate the gaps between the optimal achievable costs are negligible.

Forward contracting and incentives for disclosure

As stressed in the literature, disclosure often has different ramifications for firms’ varied constituents. Despite this complexity, a consistent theme in the literature is that a firm’s reliance on a self-interested external supplier for key inputs introduces a disincentive for disclosure. We demonstrate that the presence of forward contracting in such input markets can disable, and even reverse, this well-established theme. When a supplier opts to provide inputs for pre-purchase in a forward market, a buyer can use such pre-purchases to protect against the supplier adjusting input prices upward when disclosure reveals high product demand. This price protection does not imply that the supplier stands to lose under the arrangement—its ability to offer two-tiered pricing (forward and spot prices) provides it with a means of indirect price discrimination. Because of the supplier’s willingness to open a forward market, the firm’s reliance on the supplier for inputs actually promotes disclosure.

Natural gas pricing reform in China: Getting closer to a market system?

Recent policy in China targets an increase in the contribution of natural gas to the nation's energy supply. Historically, China's natural gas prices have been highly regulated with a goal to protect consumers. The old pricing regime failed to provide enough incentives for natural gas suppliers, which often resulted in natural gas shortage. A new gas pricing reform was tested in Guangdong and Guangxi provinces in 2011, and introduced nationwide in 2013. The reform is aimed at creating a more market-based pricing mechanism. We show that a substantial progress toward a better predictability and transparency of prices has been made. The prices are now more connected with the international fuel oil and liquid petroleum gas prices. The government's approach for a temporary two-tier pricing when some volumes are still traded at old prices reduced a potential opposition during the new regime implementation. Some limitations of the natural gas pricing remain as it created biased incentives for producers and favors large natural gas suppliers. The pricing reform at its current stage falls short of establishing a complete market mechanism driven by an interaction of supply and demand of natural gas in China.

Multipart tariffs and bounded rationality: An experimental analysis of mobile phone plan choices

Multipart tariff structures add to the computational challenges in choosing mobile phone connection services. We study the quality of decision making in a laboratory environment where consumers only face a small set of mobile phone plan options but have to contend with different degrees of tariff complexity as well as uncertain usage. Our main finding is that simply eliminating the multipart tariff structure does not necessarily lead to better decisions. Rather it is multipart tariffs with included values in excess of monthly fees, thus entailing two-tier pricing structures with increasing marginal costs, which lead to the worst decisions. Knowledgeable participants, who understand mobile phone plan pricing, make significantly better choices.

Welfare Gains of the Poor: An Endogenous Bayesian Approach with Spatial Random Effects

We introduce a Bayesian instrumental variable procedure with spatial random effects that handles endogeneity, and spatial dependence with unobserved heterogeneity. We take into account the endogeneity through a system of simultaneous equations where a conditional correlation between the stochastic errors captures the endogeneity, and exclusion restrictions are used to treat endogenous regressors. In addition, we propose a Bayesian hierarchical spatial framework to model spatial dependence and heterogeneity. A Gibbs sampling algorithm is used to draw samples from all our conditional posterior distributions. We find through a limited Monte Carlo experiment that our proposal works well in terms of point and interval estimates, as well as prediction, compared with other possible alternatives. Taking advantage of the fact that a Bayesian framework permits easily performing statistical inference related to complicated non-linear functions of parameter estimates, we apply our method to analyze the welfare effects on the poorest households generated by a process of electricity tariff unification. In particular, we deduce an Equivalent Variation measure from a logarithmic demand function and a budget constraint for a two-tiered pricing scheme. We find the posterior distribution of the Equivalent Variation, and estimate the welfare implications in a context where electricity tariffs decreased by as much as 17.53%. We find that 10% of the poorest municipalities attained welfare gains above 2% of their initial income.

Welfare Gains of the Poor: An Endogenous Bayesian Approach with Spatial Random Effects

We introduce a Bayesian instrumental variable procedure with spatial random effects that handles endogeneity, and spatial dependence with unobserved heterogeneity. We find through a limited Monte Carlo experiment that our proposal works well in terms of point estimates and prediction. Then, we apply our method to analyze the welfare effects on the poorest households generated by a process of electricity tariff unification. In particular, we deduce an Equivalent Variation measure where there is a budget constraint for a two-tiered pricing scheme, and find that 10% of the poorest municipalities attained welfare gains above 2% of their initial income.

Optimal Pricing Strategy for Operators in Cognitive Femtocell Networks

Cognitive femtocell has been envisioned as a promising technology for covering indoor environment and assisting heavy-loaded macrocell network. Although lots of technical issues of cognitive femtocell network have been studied, e.g., spectrum sharing, interference mitigation, etc., the economic issues that are very important for practical femtocell deployment have not been well investigated in the literatures. In this paper, we focus on the pricing issues in the cognitive femtocell network and propose a two-tier pricing game theoretic framework with two models: static and dynamic pricing models. In the static pricing model, we derive the closed-form expressions for pricing and demand functions, as well as the Nash equilibrium pricing strategies for both macrocell and femtocell operators. In the dynamic pricing model, we first model the cognitive users' network access behavior as a two-dimensional Markov decision process and propose a modified value iteration algorithm to find the best strategy profiles for cognitive users. Based on the analysis of users' behavior, we further design an iterative gradient descent algorithm to find the Nash equilibrium pricing strategies for both macrocell and femtocell operators. Simulation results verify our theoretic analysis and show that the proposed algorithm in the dynamic pricing model can quickly converge to the Nash equilibrium prices.

Contrasting perspectives on China's rare earths policies: Reframing the debate through a stakeholder lens

This article critically compares China's rare earth policy with perspectives upheld in the rest of the world (ROW). We introduce rare earth elements and their importance for energy and present how China and the ROW are framing the policy debate. We find strongly dissonant views with regards to motives for foreign direct investment, China's two-tiered pricing structure and its questionable innovation potential. Using the metaphor of “China Inc.”, we compare the Chinese government to a socially responsible corporation that aims to balance the needs of its internal stakeholders with the demands from a resource-dependent world. We find that China's internal stakeholders have more power and legitimacy in the REE debate than the ROW and reconceptualise various possible mitigation strategies that could change current international policy and market dynamics. As such, we aim to reframe the perspectives that seem to govern the West and argue in favor of policy formation that explicitly acknowledges China's triple bottom line ambitions and encourages the ROW to engage with China in a more nuanced manner.

Pricing irrigation water for drought adaptation in Iran

This paper examines alternative water pricing arrangements that better manage and more accurately reflect conditions of increased water scarcity experienced during drought in Iran. A comprehensive water balance and crop use model compares the existing below cost water pricing model with an alternative two-tiered pricing approach. The tiers reflect two uses of irrigation water. The uses are (1) subsistence level crop production from farm household production of crops for food security and (2) discretionary cropping. Results of the study offer evidence for a reform of Iranian water pricing principles, subject to caveats described by the authors.

Pricing and Water Resource Allocation Scheme for the South-to-North Water Diversion Project in China

The eastern route of the South-to-North Water Diversion (SNWD-ER) project is a massive-scale interbasin system to transfer water from the Yangtze River to North China. With the infrastructure construction close to completion, the project is now faced with many complicated operations management problem at different levels. The problems are unique in that, on the one hand, the project is expected to be financially self-sustainable by charging water usages, and on the other hand, the water price is regulated for its nature as a social product. One such problem is to achieve a rational water allocation among different users by appropriate pricing schemes. In this paper, we study how to use a two-tier pricing scheme to balance the water allocation by using a Stackelberg game model. From the study, we find that (1) the Stackelberg game always has equilibrium solutions to balance the benefit of every party in the system, which implies that the two-tier pricing scheme can effectively coordinate the water allocation; (2) the two-tier pricing scheme can also result in multiple desirable by-products such as encouraging the implementation of water saving mechanism and giving the local water users certain priority; and (3) the government can adjust the pricing parameters to control and balance the profit of every party. As such we conclude that the two-tier pricing scheme is an effective way that integrates both the government control and market powers to ensure the public interest and the economic benefit, which is suitable for SNWD-ER project.

Remaking the World's Largest Coal Market: The Quest to Develop Large Coal-Power Bases in China

China's coal market is now in the midst of a radical restructuring that has the potential to change how coal is produced, traded and consumed both in China and the rest of the world. The restructuring aims to integrate the coal and power sectors at giant that combined would churn out more coal annually than all the coal produced in the entire United States. Coal-power integration is now a focal point of the Chinese government's energy policy, driven by the dramatic conflict. Coal prices are market-based, but power prices are tightly controlled by the government. This has caused massive losses for Chinese power generators in 2008 and 2010 and triggered government intervention in the coal market with attempts to cap the price of coal. The pervasive conflict between coal and power is now driving the Chinese government to remake these markets.Coal-power base policy aims to establish upwards of 14 major coal-power bases, each producing over 100 mt of coal with consuming industries on-site. The plan envisions that roughly half of China's coal production would be produced at a handful major coal-power base sites that are controlled by key state-owned enterprises (SOEs) and the central government. PESD's new research analyzes China's coal-power base reforms and how they will impact Chinese and global coal markets. Several key findings are:First, the implementation of coal-power bases would enhance central government's control over the coal sector and over coal prices. The government could control coal pricing in a large share of the market and mitigate power sector losses by mandating lower coal transaction prices within integrated SOEs. Using this kind of internal transfer pricing at below market prices for up to half of China's coal would represent a meaningful shift in how coal is priced in China. If a large share of China's coal were transacted in this manner, it might create an unofficial two-tiered pricing structure in the coal market.Second, coal-power base policy would bring about modernization and mechanization of a larger share of China's coal production, in theory bringing larger economies of scale to the sector. While up-front capital investment per ton produced will certainly increase, the marginal cost of coal production should decrease, all other things equal. Third, the massive rebalancing of China's coal market implied by coal-power bases is poised to have important impacts on the globally traded coal market. Since 2009, China's import behavior has become a dominant factor determining the price of globally traded coal. In simple terms, when Chinese domestic prices are higher than global prices, the country imports. The development of coal-power bases could radically alter coal price formation in China and directly impact China's appetite for imports, and therefore has the potential to alter coal price formation globally.

Showdown at Doha: The Secret Oil Deal That Helped Sink the Shah of Iran

What led to the calamitous drop in Iran's oil revenues in January 1977? Politics, religion, culture, and economics have been identified as factors contributing to the collapse of Iran's monarchy in 1979. But until now scholars have been unable to access documents could shed light on the inner workings of the relationship between senior US officials and the Shah of Iran, whom Henry Kissinger lauded as that rarest of leaders, an unconditional ally, and one whose understanding of the world enhanced our own.1 The declassification of the papers of Brent Scowcroft, who worked in the Nixon and Ford Administrations, marks a significant milestone in our understanding of the origins of the Iranian Revolution. They reveal in 1976 the US and Saudi Arabia colluded to force down oil prices, inadvertently triggering a financial crisis destabilized Iran's economy and weakened the Shah's hold on power. In the first nine days of January 1977, Iran's economy was battered by unusual turbulence in international oil markets. Hundreds of millions of dollars in anticipated revenue were erased by a sudden and precipitous drop in daily oil exports, while total oil production plunged 38% over the previous month.2 Financial hemorrhaging forced the Shah's government to rewrite its budget, cancel new spending projects, freeze foreign aid programs, and take out a $500 million emergency loan from US and European banks.3 The immediate cause of Iran's fiscal crisis was Saudi Arabia's bold decision to challenge an increase in oil prices agreed to by the rest of the Organization of Petroleum Exporting Countries (OPEC) at a December 1976 meeting in Doha, Qatar. The Saudi Oil Minister, Shaykh Ahmad Zaki Yamani, had announced his government would offset the impact of the price hike by selling more of its own petroleum at a reduced price.4 Yamani's threat to flood the market with cheap oil never came about, but OPEC's two-tiered pricing system remained in effect for six months and dealt Iranian finances a grievous blow. The Shah's chief economists later confirmed the government had never considered the possibility of a steep drop in oil prices and production.5 It had overestimated oil revenues never materialized and spent money it would now never see. But worse was to come. The government's attempt to restore fiscal order only compounded the crisis. Its harsh deflationary budget led to high unemployment and social unrest helped create a classic prerevolutionary situation.6 The Shah's personal reaction to the Saudi action was telling. Muhammad Reza Pahlavi had been counting on higher oil prices to buttress Iran's anemic economy - and strengthen his hand - while he embarked on a highly risky course of political liberalization at home. We're broke, he despaired on January 2, 1977. Everything seems doomed to grind to a standstill, and meanwhile many of the programs we had planned must be postponed ... It's going to be very tough.7 This year, 2008, marks the 30th anniversary of the outbreak of unrest in Iran flared into revolution and ultimately led to the collapse of the ancien regime, the royal family's flight into exile, and the United States' loss of Iran as a strategic partner in West Asia and the Persian Gulf. While much scholarly focus has been on the internal political, cultural, economic, and social origins of the revolution, the role of state finances - and oil revenues in particular - in precipitating the catastrophe has received far less attention. The Iranian Revolution shares similarities with two other great revolutions: France in 1789 and Russia in 1917. All three upheavals were preceded by fiscal crises.8 In Iran's case the dramatic revenue fluctuations of 1977 were acknowledged and duly noted at the time by Tehran-based foreign correspondents.9 But the underlying rationale for Saudi Arabia's decision to torpedo the December 1976 OPEC oil price increase, and particularly the Ford Administration's role in fateful decision, has not been explained until now. …