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Article: Optimal two-part pricing under cost uncertainty

TitleOptimal two-part pricing under cost uncertainty
Authors
KeywordsCost uncertainty
Heterogeneous consumers
Risk aversion
Two-part pricing
Issue Date2012
PublisherJohn Wiley & Sons Ltd. The Journal's web site is located at http://www3.interscience.wiley.com/cgi-bin/jhome/7976
Citation
Managerial And Decision Economics, 2012, v. 33 n. 1, p. 39-46 How to Cite?
AbstractThis paper examines the optimal two-part pricing under cost uncertainty. We consider a risk-averse monopolistic firm that is subject to a cost shock to its constant marginal cost of production. The firm uses two-part pricing to sell its output to a continuum of heterogeneous consumers. We show that the global and marginal effects of risk aversion on the firm's optimal two-part pricing are to raise the unit price and lower the fixed payment. We further show that an increase in the fixed cost of production induces the firm to raise (lower) the unit price and lower (raise) the fixed payment under decreasing (increasing) absolute risk aversion. The firm's optimal two-part pricing is unaffected by changes in the fixed cost under constant absolute risk aversion. Finally, we show that a mean-preserving spread increase in cost uncertainty induces the firm to raise the unit price and lower the fixed payment under either decreasing or constant absolute risk aversion. © 2011 John Wiley & Sons, Ltd.
Persistent Identifierhttp://hdl.handle.net/10722/145597
ISSN
2015 SCImago Journal Rankings: 0.546
References

 

DC FieldValueLanguage
dc.contributor.authorWong, KPen_HK
dc.date.accessioned2012-02-28T01:56:35Z-
dc.date.available2012-02-28T01:56:35Z-
dc.date.issued2012en_HK
dc.identifier.citationManagerial And Decision Economics, 2012, v. 33 n. 1, p. 39-46en_HK
dc.identifier.issn0143-6570en_HK
dc.identifier.urihttp://hdl.handle.net/10722/145597-
dc.description.abstractThis paper examines the optimal two-part pricing under cost uncertainty. We consider a risk-averse monopolistic firm that is subject to a cost shock to its constant marginal cost of production. The firm uses two-part pricing to sell its output to a continuum of heterogeneous consumers. We show that the global and marginal effects of risk aversion on the firm's optimal two-part pricing are to raise the unit price and lower the fixed payment. We further show that an increase in the fixed cost of production induces the firm to raise (lower) the unit price and lower (raise) the fixed payment under decreasing (increasing) absolute risk aversion. The firm's optimal two-part pricing is unaffected by changes in the fixed cost under constant absolute risk aversion. Finally, we show that a mean-preserving spread increase in cost uncertainty induces the firm to raise the unit price and lower the fixed payment under either decreasing or constant absolute risk aversion. © 2011 John Wiley & Sons, Ltd.en_HK
dc.languageengen_US
dc.publisherJohn Wiley & Sons Ltd. The Journal's web site is located at http://www3.interscience.wiley.com/cgi-bin/jhome/7976en_HK
dc.relation.ispartofManagerial and Decision Economicsen_HK
dc.subjectCost uncertaintyen_HK
dc.subjectHeterogeneous consumersen_HK
dc.subjectRisk aversionen_HK
dc.subjectTwo-part pricingen_HK
dc.titleOptimal two-part pricing under cost uncertaintyen_HK
dc.typeArticleen_HK
dc.identifier.emailWong, KP: kpwongc@hkucc.hku.hken_HK
dc.identifier.authorityWong, KP=rp01112en_HK
dc.description.naturelink_to_subscribed_fulltext-
dc.identifier.doi10.1002/mde.1559en_HK
dc.identifier.scopuseid_2-s2.0-83155192173en_HK
dc.identifier.hkuros198753en_US
dc.relation.referenceshttp://www.scopus.com/mlt/select.url?eid=2-s2.0-83155192173&selection=ref&src=s&origin=recordpageen_HK
dc.identifier.volume33en_HK
dc.identifier.issue1en_HK
dc.identifier.spage39en_HK
dc.identifier.epage46en_HK
dc.publisher.placeUnited Kingdomen_HK
dc.identifier.scopusauthoridWong, KP=7404759417en_HK

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