Wholesale pricing in a small open economy

This paper addresses the empirical analysis of wholesale profit margins using data of the Dutch wholesale sector, 1986. At the heart of the analysis is the typical nature of wholesale production: wholesalers do not produce a tangible product, but offer a service capacity. This has an immediate impact on the identification, interprelation and measurement of determinants of profit variations. A model is set up to explain variations in wholesale profit margins, which is inspired by two widely applied approaches to industry pricing: the behavioural mark-up model and the marginalist price-cost model

Strategic inventories under limited commitment

In a dynamic storable good market where demand changes over time, we investigate the producer's strategic incentives to hold inventories in response to the possibility of buyer stockpiling. The literature on storable goods has demonstrated that buyer stockpiling in anticipation of higher future prices harms the producer's profitability, particularly when the producer cannot commit to future prices. We show that the producer's inventories act as a strategic device to mitigate the loss from the lack of commitment. Our results provide a rationale for the producer's inventory behavior that sheds new light on the well-documented empirical evidence about inventories

The Discounted Economic Stock of Money with VAR Forecasting

Monetary aggregation, Divisia money aggregate, Economic stock of money, User cost of money, Currency equivalent index, Bayesian vector autoregression, Asymmetric vector autoregression, E41, G12, C43, C22, E5,

Business strategy, human capital, and managerial incentives.

We posit that the value of a manager's human capital depends on the firm's business strategy. The resulting interaction between business strategy and managerial incentives affects the organization of business activities. We illustrate the impact of this interaction on firm boundaries in a dynamic agency model. There may be disadvantages in merging two firms even when such a merger allows the internalization of externalities between the two firms. Merging, by making unprofitable certain decisions, increases the cost of inducing managerial effort. This incentive cost is a natural consequence of the manager's business-strategy-specific human capital

When Will an Airline Stand Its Ground? An Analysis of Fare Wars

The research presented in this paper focuses on the recent onset of price wars in the airline industry while accommodating multimarket contact, multiple products, and a dispersed price distribution. An important innovation in this study is in developing a price war definition using a rank dominance criterion. A second innovation is the extension of a probit model to a bivariate probit, which assesses the behavior of multimarket firms after a price war occurs. In particular, a carrier may choose to stay and fight when a price war erupts or may simply leave a route. Carriers will engage in fare wars when market shares change, higher elasticity customers patron the route, and load factors drop. Carriers will leave routes after a fare war when offering service to another carrier's hub but will remain steadfast in their own spheres of influence.Price wars; Airline industry studies; Multimarket contact, JEL classifications: LI3, L93,