Search results for "Fixed cost"
showing 10 items of 20 documents
Most-favored-customer pricing, product variety, and welfare
2013
Abstract Most-favored-customer (MFC) clauses are usually seen as anticompetitive co-ordination devices that firms adopt for the purpose of higher prices. Here, I examine the welfare impact of MFC clauses under endogenous product variety. Product variety is relevant because prospective higher prices from MFC clauses can be anticipated by multi-product firms in their provision of product lines. Under such circumstances, I find that these clauses can be socially harmful, but this is not always the case: they tend to be socially neutral for relatively large fixed costs of product-line assortment, harmful for intermediate costs, and beneficial for relatively small costs.
Welfare, Home Market Effects, and Horizontal Foreign Direct Investment
2005
We investigate the spatial distribution and organization of an imperfectly competitive industry when firms may choose to operate more than a single production unit. Focusing on a short-run setting with a fixed mass of firms, we fully characterize the spatial equilibria analytically. Comparing the equilibrium and the first-best, we show that both organizational and spatial inefficiencies may arise. In particular, when fixed costs are low enough the market outcome may well lead to overinvestment and, therefore, to too many multinationals operating from a social point of view. Furthermore, once multinationals are taken into account, the market outcome may well lead too little agglomeration.
Fixed Costs Per Shipment
2011
Exporting firms do not only decide how much of their products they ship abroad but also at which frequency. Doing so, they face a trade-off between saving on fixed costs per shipments (by shipping large amounts infrequently) and saving on storage costs (by delivering just in time with small and frequent shipments). The firm's optimal choice defines a mapping from size and frequency of shipments to fixed costs per shipment. We use a unique dataset of Swiss cross-border trade on the transaction level to analyze the size and shape of the underlying fixed costs. The data suggest that for the average Swiss exporter the fixed costs per shipment are economically important: 0.82 percent of the valu…
Regional Inequality and Product Variety
2005
We investigate how differences in set-up costs of various types affect the trade-off between global efficiency and spatial equity and show that the standard assumption of symmetry in fixed costs masks the existence of an interesting effect: the range of available varieties varies depends on the spatial distribution of firms. In such a setting, even when the market outcome leads to excessive agglomeration under symmetric fixed costs, a planner opts for asymmetric fixed costs and more agglomeration. The reason is that the losses induced by more agglomeration are offset by the gains due to additional product variety.
Entry and exit in a vertically differentiated industry
2011
This paper presents a duopoly model of firm rivalry in a vertically differentiated industry when market dynamics is explicitly accounted for. It shows how the interplay between demand (degree of product differentiation, demand elasticity) and cost (fixed and quality costs) factors determine firms’ relative strength when quality is irreversible. The main strategic choices are product quality, price and the timing of entry and exit. Further, firms incur sunk quality costs at time of entry and operating fixed costs of maintaining quality. Although the low quality firm may outlast its rival in the declining phase, both firms wish to be the “quality leader”.
Measuring Seasonality: Performance of Accommodation Establishments in Sicily through the analysis of Occupancy Rates
2011
Tourism, more than other fields, needs to be managed. As such, the provision of reliable information and adequate tools is one of the major challenges to monitor and to manage tourism destinations. Sicily (Italy) seems to have a great potential coming from its tourism resources, and most of the recent development programs have been focused on tourism. In line with the world’s trend, tourism in Sicily faced a growth in terms of overnight stays, from about 9 millions in 1994, to more than 14 millions in 2007. The regional expenditure in tourism from 1996 to 2006 was of euro 785 millions (Federalberghi, 2007), which ranks Sicily as the second region in Italy for tourism expenditure, in the yea…
An Innovative Pricing Method for Telecommunication Services Pricing through American Options
2009
With the evolution of telecommunication networks and of their services the role of service provider is changed, so nowadays there is a coexistence of Network Operators and Virtual Operators. The difference between these players is not in the way they offer a service but primarily in their economic objectives and risk attitudes. Essentially, Network Operators own their infrastructures and typically have to sustain both fixed costs (CAPEX) and recurrent costs (OPEX), while Virtual Operators may have a simpler cost structure, mainly consisting of OPEX for the hire of network resources. Since these two operators can provide the same service in two different markets, their objectives differ subs…
American Options Based Service Pricing For Virtual Operators
2008
In the recent years, the role of service provider has split into two broad categories: Network Operators, offering services over their networks, and Virtual Operators, providing services over leased resources. What differentiates these players is to a minor extent a matter of enhanced service offer, and primarily a matter of economic objectives and risk attitudes. Essentially, Network Operators own their infrastructures and typically have to sustain both fixed costs (CAPEX) and recurrent costs (OPEX), while Virtual Operators may have a simpler cost structure, mainly consisting of OPEX for hiring the network. Correspondingly, the objectives of these players may differ profoundly: on one hand…
Yield and profitability of modified spanish bush and Y-trellis training systems for peach
2015
Peach trees trained to modified Spanish bush (MSB) and Y-trellis (Y) were evaluated and compared in the Mediterranean settings of Southern Italy. The observations included two peach (Rich May and Summer Rich) and two nectarine (Big Bang and Nectaross) cultivars. In the MSB system, trees were spaced at 4.5 x 2.5 m (888 trees/ha), whereas in the Y system, trees were spaced at 5.5 x 2 m (909 trees/ha). Costs at planting, yield per tree, fruit size grade, unit price of sold peaches for each size grade, amount and cost of materials and labor for cultural management, and grower's profit were quantified throughout all six years from planting and at full crop (year 4-6). Fixed costs of the MSB syst…
Stackelberg equilibrium with many leaders and followers. The case of zero fixed costs
2017
Abstract I study a version of the Stackelberg game with many identical firms in which leaders and followers use a continuous cost function with no fixed cost. Using lattice theoretical methods I provide a set of conditions that guarantee that the game has an equilibrium in pure strategies. With convex costs the model shows the same properties as a quasi-competitive Cournot model. The same happens with concave costs, but only when the number of followers is small. When this number is large the leaders preempt entry. I study the comparative statics and the limit behavior of the equilibrium and I show how the main determinants of market structure interact. More competition between the leaders …