Article thumbnail

Strategic Pricing Behavior under Asset Value Maximization

By Shinn-Shyr Wang, Kyle W. Stiegert and Tirtha P. Dhar


"In this paper, we empirically evaluate strategic pricing behavior and shareholder delegation of financial market objectives in the U.S. butter and margarine market. Shareholders are assumed to maximize the value of firm assets according to a certainty equivalent capital asset pricing model (CAPM). The delegation setup instructs managers to maximize a linear combination of firm profits and shareholder equity values. A key result from the analysis is that a test of financial market influences cannot be rejected in the product market for butter and margarine. Product market competition is best described using a conjectural variation model of industrial organization. Estimates of Lerner Indexes suggest significant market power and counterfactual simulations point toward significant biases in estimated Lerner Indexes when capital market dimensions are ignored or if the wrong market structure is assumed." Copyright (c) 2009 Canadian Agricultural Economics Society.

DOI identifier: 10.1111/j.1744-7976.2009.01174.x
OAI identifier:
Download PDF:
Sorry, we are unable to provide the full text but you may find it at the following location(s):
  • http://www.blackwell-synergy.c... (external link)
  • Suggested articles

    To submit an update or takedown request for this paper, please submit an Update/Correction/Removal Request.