Value, Price of Production and Market Price

This entry, submitted to Philip O’Hara’s Encyclopedia of Political Economy but not included in it, contrasts the temporal and simultaneist approaches to the formation of price and its relation to value.price, value, transformation, Marx, TSSI, non-equilibrium, history of economic thoughtprice, value, transformation, Marx, TSSI, non-equilibrium, history of economic thought

Auctions with heterogeneous entry costs

We study the impact of public and secret reserve prices in auctions where buyers have independent private values and heterogeneous entry costs. We find that in a standard auction the optimal (i.e., revenue maximizing) public reserve price is typically above the seller's value. Moreover, an appropriate entry fee together with a public reserve price equal to the seller's value generates greater revenue. Secret reserve prices, however, differ across auction formats. In a second-price sealed-bid auction the secret reserve price is above the optimal public reserve price; hence there is less entry, a smaller probability of sale, and both the seller revenue and the bidders' utility are less than with an optimal public reserve price. In contrast, in a first-price sealed-bid auction the secret reserve is equal to the seller's value, and the bidders' expected utility (seller revenue) is greater (less) than with an optimal public reserve price

Speculation in Standard Auctions with Resale

In standard auctions with symmetric, independent private value bidders resale creates a role for a speculator—a bidder who is commonly known to have no use value for the good on sale. For second-price and English auctions the efficient value-bidding equilibrium coexists with a continuum of inefficient equilibria in which the speculator wins the auction and makes positive profits. First-price and Dutch auctions have an essentially unique equilibrium, and whether or not the speculator wins the auction and distorts the final allocation depends on the number of bidders, the value distribution, and the discount factor. Speculators do not make profits in first-price or Dutch auctions

On the strategic choice of spatial price policy: the role of the pricing game rules

In this paper, whe show that the strategic choice of spatial price policy under duopoly crucially depends on the rules of price competition. Thisse and Vives (1988) show that spatial price discrimination is a dominant strategy when the mill pricing firm is the leader and the discriminatory firm is the follower. When the leader-follower roles are reversed we find that equilibrium pricing policies depend on the consumer's reservation value. The pricing policy game has two equilibria in pure strategies, either both firms price uniformly (f.o.b.) or both firms price discriminate, when the reservation value is low. For intermediate levels of the reservation value, price discrimination is a dominant strategy and the pricing policy game is similar to a Prisoner's Dilemma. When the consumer reservation value is large enough we obtain asymmetric equilibria in which one firm prices according to f.o.b. and the other price discriminates. We also analyze the case of simultaneous price competition and find a mixed strategies equilibrium for the price competition subgame such that the pricing policy game has two equilibria in pure strategies, either both firms price uniformly or both firms price discriminate.spatial price discrimination, price policy

THE SUBSTANTIATION OF THE PRICE STRATEGIES ACCORDING TO THE CONSUMERS’ BUYING BEHAVIOUR

The firm’s position on the market is determined by the value offered by selling its products or offering its services, the public relations depending on the customers’ perception of the value of the product or service offered to them, and the position occupied in relation to the competitors is determined by the level of the product’s prices and advantages offered by the competition. The price and the value-price ratio are two fundamental variables of which the firm’s survival depends in the competitive environment. To ensure the fact that the pricing strategy be a long-term success we must define in the early stage of development-research the value-price ratio, having in view that it’s possible for a product with an increased perceived value not to be introduced on the market with a competitive price, an aspect that can be approached using the target costs and target value method, a method that allows to define the production costs limits and fixing the target price to avoid the launching errors.price strategies, perceived value, strategic competitive advantage, target value, value/price ration, optimal level of performance.

The Paternity of the Price-Quality "Value Map"

In the literature on firm strategy and product differentiation, consumer price-quality trade-offs are sometimes represented using consumer “value maps”. These involve the geometric representation of indifferent price and quality combinations as points along curves that are concave to the “quality” axis. In this paper, it is shown that the value map for price-quality tradeoffs may be derived from a Hicksian compensated demand curve for product quality. The paper provides the theoretical link between analytical methods employed in the existing literature on firm strategy and competitive advantage with the broader body of economic analysis