Optimal Nonlinear Pricing, Bundling Commodities and Contingent Services

In this paper, we propose to analyze optimal nonlinear pricing when a firm offers in a bundle a commodity and a contingent service. The paper studies a mechanism design where all private information can be captured in a single scalar variable in a monopoly context. We show that to propose the package for commodity and service is less costly for the consumer, the firm has lower consumers rent than the situation where it sells their good and contingent service under an independent pricing strategy. In fact, the possibility to use price discrimination via the supply of package is dominated by the fact that it is costly for the consumer to sign two contracts. Bundling energy and a contingent service is a profitable strategy for a energetician monopoly practising optimal nonlinear tariff. We show that the rates of the energy and the contingent service depend to the optional character of the contingent service and depend to the degree of complementarity between commodities and services.Bundling, Nonlinear pricing, Energy market

Justify or die? - using contingent valuation of service provision in a UK public library

The public library service in the UK is currently under pressure to justify its existence. An Audit Commission report suggested that if current borrowing rates for libraries continue into the future, libraries would be effectively issuing no books by 2020. Recently the Coates Report asserted about book loans that, "in simple terms, if a service is without separate charge and the public decides not to use it, then the service is de facto without any value to these individuals". Yet Coates' simplistic notions of the services public libraries provide lies at the heart of the problem. Performance indicators based on book loans are unable to assess 'the totality of library effectiveness'. Conversely, qualitative analysis, interviewing users about service impact, shows that libraries 'promote social cohesion and community confidence'. However qualitative findings are by nature not quantitative and not comparable. To try to produce a measure for service quality, contingent valuation was chosen. It elicits economic value judgements from users on both services they use and services they do not use. A major independent study using contingent valuation was conducted by the Department of Computer and Information Sciences at the University of Strathclyde on East Renfrewshire Library Services, near Glasgow, which is recognised as an exemplary public library service. The study revealed the inability of contingent valuation to adequately assess the complex mix of services provided. The study concludes that an urgent rethink is required regarding measures for public library service evaluation

Optimal Nonlinear Pricing, Bundling Commodities and Contingent Services

International audienceIn this paper, we propose to analyze optimal nonlinear pricing when a firm offers in a bundle a commodity and a contingent service. The paper studies a mechanism design where all private information can be captured in a single scalar variable in a monopoly context. We show that to propose the package for commodity and service is less costly for the consumer, the firm has lower consumers rent than the situation where it sells their good and contingent service under an independent pricing strategy. In fact, the possibility to use price discrimination via the supply of package is dominated by the fact that it is costly for the consumer to sign two contracts. Bundling energy and a contingent service is a profitable strategy for a energetician monopoly practising optimal nonlinear tariff. We show that the rates of the energy and the contingent service depend to the optional character of the contingent service and depend to the degree of complementarity between commodities and services

Nominal versus Indexed Debt: A Quantitative Horse Race

The main arguments in favor and against nominal and indexed debt are the incentive to default through inflation versus hedging against unforeseen shocks. We model and calibrate these arguments to assess their quantitative importance. We use a dynamic equilibrium model with tax distortion, government outlays uncertainty, and contingent-debt service. Our framework also recognizes that contingent debt can be associated with incentive problems and lack of commitment. Thus, the benefits of unexpected inflation are tempered by higher interest rates. We obtain that costs from inflation more than offset the benefits from reducing tax distortions. We further discuss sustainability of nominal debt in developing (volatile) countries.

The sensitivity of willingness to pay to an economic downturn

Stated preference (SP) studies are typically undertaken at one point in time, while the results may be relied on in decision-making several months or even years later. This reliance is only justified if values are stable over time, an assumption which is doubtable given the onset of an economic downturn. We assess the reliability of values taken before an economic downturn for application during the downturn, via analysis of responses to two near identical surveys conducted respectively before and during the 2008-2010 economic recession. The surveys were valuing near identical sets of permanent water sector service and environmental improvements. Each survey employed a dichotomous choice and a payment card contingent valuation question. Our main result is that the economic downturn led to lower payment card responses but had no effect on the values elicited via a dichotomous choice (ie referendum-type) contingent valuation question. We explore potential explanations for this finding in light of the literature on closed-ended versus open-ended elicitation method comparisons

IT service management: towards a contingency theory of performance measurement

Information Technology Service Management (ITSM) focuses on IT service creation, design, delivery and maintenance. Measurement is one of the basic underlying elements of service science and this paper contributes to service science by focussing on the selection of performance metrics for ITSM. Contingency theory is used to provide a theoretical foundation for the study. Content analysis of interviews of ITSM managers at six organisations revealed that selection of metrics is influenced by a discrete set of factors. Three categories of factors were identified: external environment, parent organisationand IS organisation. For individual cases, selection of metrics was contingent on factors such as organisation culture, management philosophy and perspectives, legislation, industry sector, and customers, although a common set of four factors influenced selection of metrics across all organisations. A strong link was identified between the use of a corporate performance framework and clearly articulated ITSM metrics

On Debt Service and Renegotiation when Debt-holders Are More Strategic

The contingent claims analysis of the firm financing often presents a debt renegotiation game with a passive bank which does not use strategically its capability to force liquidation, contrary towhat is observed in practice. The first purpose of this paper is to introduce more strategic bank behaviour into the continuous-time model developed by Mella-Barral and Perraudin (1997) and Hackbarth, Hennessy, and Leland (2007). Its second purpose is to account for variations in the information obtained by the parties during the contract period. We show that with public information and private debt only, the optimal probability of debt renegotiation is fixed by the firm's anticipated liquidation value. When we add public debt and asymmetric information, the good-type firm may be tempted to mimic the bad-type to reduce its debt service. We show that to deter such mimicking, banks may sometimes refuse to renegotiate with strong firms having a low liquidation value. Our results are in line with the empirical observation that recovery rate at emergence of bankruptcy is function of the share of private debt in all the firm's debt and is relatively low.Debt service, debt renegotiation, recovery rate, strategic bank, bankruptcy, contingent claim

Irish Public Service Broadcasting - A Contingent Valuation Analysis

Irish public service broadcasting faces enhanced domestic and international competition and increasingly the Irish public service broadcaster (RTÉ) is being called upon to justify the scale of the television licence fee, its major source of funding. This paper describes the first nationwide valuation of RTÉ’s services. In analysing the determinants of respondents’ willingness to pay for RTÉ’s services, the importance of domestic and international competing services and the relationships between willingness to pay for, usage of, and satisfaction with, RTÉ’s services are analysed. In addition, this paper highlights the importance of distinguishing between household, and individual, willingness to pay.

RAMSEY FISCAL AND MONETARY POLICY UNDER STICKY PRICES AND LIQUID BONDS

We construct a monetary model where government bonds also provide liquidity service. Liquid government bonds create an endogenous interest-rate spread; affect equilibrium allocations and inflation by altering the Ramsey planner’s sequence of implementability and sticky-price constraints. The trade-off confronting a planner in a sticky-price world, shown in recent literature, between using inflation surprise and labor-income tax is modified by the existence of the liquid bond. We find that the more sticky prices become, the more the planner stabilizes prices and also creates less distortionary and less volatile income taxes by taxing the liquidity service of bonds in order to replicate ex post real state-contingent debt.

Unions and the Contingent Work Force

[Excerpt] Unions seeking to organize the unorganized face increasing numbers of part-time, temporary and leased employees. These contingent workers now make up more than a quarter of the American work force. Of the new work force they are the least organized and perhaps the most difficult to organize. But they are also the group most in need of the protections, benefits and representation that a union can provide. There have always been some service industries such as hotel, health care and retail, that have maintained a large contingent work force because of long hours and fluctuating demand. Also there have been many workers, especially women, students and elderly workers, who have preferred part-time and temporary employment because of family, health or educational priorities. Recently, however, American corporations have been replacing permanent full-time workers with temporary, part-time and leased employees for the sole purpose of cutting wages and salaries, increasing management flexibility, and in many cases avoiding unionization. Thus the number of part-time and temporary workers is increasing in every industry and job classification, whether assembly line worker, registered nurse, or computer programmer