126,681 research outputs found
State-Dependent Nominal Rigidities & Disinflation Programs in Small Open Economies
Empirical regularities from high-inflation economies, especially in Latin America, suggest that exchange rate-based (ERB) disinflations and money-based (MB) disinflations induce sharply different dynamics in consumption and GDP. I study the role of nominal rigidities to explain business cycle fluctuations associated to ERB and MB disinflations within a single framework. By building on Calvo's (1983) pricing theory, this paper introduces elements of state-dependent pricing at the firm level into an otherwise standard small open economy model. This new feature allows for endogenous variations in the aggregate degree of nominal rigidities. The model contains as a special case a time- dependent pricing model discussed in the literature. Nonlinear simulations show that the model with state-dependent nominal rigidities generates a dynamic behavior that is more consistent with the empirical evidence, compared to the model with time-dependent pricing.
Contextual Dynamic Pricing with Strategic Buyers
Personalized pricing, which involves tailoring prices based on individual
characteristics, is commonly used by firms to implement a consumer-specific
pricing policy. In this process, buyers can also strategically manipulate their
feature data to obtain a lower price, incurring certain manipulation costs.
Such strategic behavior can hinder firms from maximizing their profits. In this
paper, we study the contextual dynamic pricing problem with strategic buyers.
The seller does not observe the buyer's true feature, but a manipulated feature
according to buyers' strategic behavior. In addition, the seller does not
observe the buyers' valuation of the product, but only a binary response
indicating whether a sale happens or not. Recognizing these challenges, we
propose a strategic dynamic pricing policy that incorporates the buyers'
strategic behavior into the online learning to maximize the seller's cumulative
revenue. We first prove that existing non-strategic pricing policies that
neglect the buyers' strategic behavior result in a linear regret
with the total time horizon, indicating that these policies are not better
than a random pricing policy. We then establish that our proposed policy
achieves a sublinear regret upper bound of . Importantly, our
policy is not a mere amalgamation of existing dynamic pricing policies and
strategic behavior handling algorithms. Our policy can also accommodate the
scenario when the marginal cost of manipulation is unknown in advance. To
account for it, we simultaneously estimate the valuation parameter and the cost
parameter in the online pricing policy, which is shown to also achieve an
regret bound. Extensive experiments support our theoretical
developments and demonstrate the superior performance of our policy compared to
other pricing policies that are unaware of the strategic behaviors
Dynamic pricing with constant demand elasticity
The model of Gallego and van Ryzin (1994) is specialized to the case of constant elasticity of demand. A closed form is developed, which has an even simpler form than that arising with exponential demand, and possesses an excellent approximation. It is shown in this environment that monopoly is efficient, which means that all the behavior usually attributed to monopoly pricing is actually a consequence of efficient pricing and would arise even in a perfectly competitive environment. If the initial supply is not too large, it is shown that consumers have no incentive to delay their purchases in order to get a lower price at the average inventory prevailing at any time
Sequential Monte Carlo pricing of American-style options under stochastic volatility models
We introduce a new method to price American-style options on underlying
investments governed by stochastic volatility (SV) models. The method does not
require the volatility process to be observed. Instead, it exploits the fact
that the optimal decision functions in the corresponding dynamic programming
problem can be expressed as functions of conditional distributions of
volatility, given observed data. By constructing statistics summarizing
information about these conditional distributions, one can obtain high quality
approximate solutions. Although the required conditional distributions are in
general intractable, they can be arbitrarily precisely approximated using
sequential Monte Carlo schemes. The drawback, as with many Monte Carlo schemes,
is potentially heavy computational demand. We present two variants of the
algorithm, one closely related to the well-known least-squares Monte Carlo
algorithm of Longstaff and Schwartz [The Review of Financial Studies 14 (2001)
113-147], and the other solving the same problem using a "brute force" gridding
approach. We estimate an illustrative SV model using Markov chain Monte Carlo
(MCMC) methods for three equities. We also demonstrate the use of our algorithm
by estimating the posterior distribution of the market price of volatility risk
for each of the three equities.Comment: Published in at http://dx.doi.org/10.1214/09-AOAS286 the Annals of
Applied Statistics (http://www.imstat.org/aoas/) by the Institute of
Mathematical Statistics (http://www.imstat.org
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