• Title/Summary/Keyword: Dynamic Pricing Model

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A Dynamic Pricing Negotiation Model in the Online Ticket Resale Market (온라인 티켓 재판매 시장에서의 Dynamic Pricing 협상모델)

  • Cho, Jae-Hyung
    • The Journal of Society for e-Business Studies
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    • v.14 no.4
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    • pp.133-148
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    • 2009
  • This study has tried to suggest a new model that can effectively redistribute the tickets in the online ticket resale market, while suggesting a new allocation mechanism based on an agent negotiation. To this end, this study has analyzed an auction in the online ticket resale market through Game theory. As a result of new agent mechanism, it has been proved that the price stability of ticket resale market leads to an increase. An agent negotiation helps to stabilize the ticket prices that are usually inclined to rise at auction, benefiting all the participants in the negotiations, consequently showing a Pareto solution. Especially, a framework for a negotiation process is suggested and domain and processes ontology are designed interrelatedly. With this modeling, a possibility of Ontology based agent negotiation is suggested.

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Market Power in the Korea Wholesale Electricity Market (우리나라 전력시장에서의 시장지배력 행사)

  • Kim, Hyun-Shil;Ahn, Nam-Sung
    • Korean System Dynamics Review
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    • v.6 no.1
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    • pp.99-123
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    • 2005
  • Although the generation market is competitive, the power market is easily exercised the market power by one generator due to its special futures such as a limited supplier, large investment cost, transmission constraints and loss. Specially, as Korea Electric industry restructuring is similar US competitive wholesale electricity market structure which discovered the several evidences of market power abuse, when restructuring is completed the possibility that market power will be exercised is big. Market power interferes with market competitions and efficiency of system. The goal of this study is to investigate the market price effects of the potential market power and the proposed market power mitigation strategy in Korean market using the forecasting wholesale electricity market model. This modeling is developed based on the system dynamics approach. it can analyze the dynamic behaviors of wholesale prices in Korean market. And then it is expanded to include the effect of market condition changed by 'strategic behavior' and 'real time pricing.' This model can generate the overall insights regarding the dynamic impact of output withholding by old gas fire power plant bon as a marginal plant in Korean market at the macro level. Also it will give the energy planner the opportunity to create different scenarios for the future for deregulated wholesales market in Korea.

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The Relationship between Default Risk and Asset Pricing: Empirical Evidence from Pakistan

  • KHAN, Usama Ehsan;IQBAL, Javed
    • The Journal of Asian Finance, Economics and Business
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    • v.8 no.3
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    • pp.717-729
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    • 2021
  • This paper examines the efficacy of the default risk factor in an emerging market context using the Fama-French five-factor model. Our aim is to test whether the Fama-French five-factor model augmented with a default risk factor improves the predictability of returns of portfolios sorted on the firm's characteristics as well as on industry. The default risk factor is constructed by estimating the probability of default using a hybrid version of dynamic panel probit and artificial neural network (ANN) to proxy default risk. This study also provides evidence on the temporal stability of risk premiums obtained using the Fama-MacBeth approach. Using a sample of 3,806 firm-year observations on non-financial listed companies of Pakistan over 2006-2015 we found that the augmented model performed better when tested across size-investment-default sorted portfolios. The investment factor contains some default-related information, but default risk is independently priced and bears a significantly positive risk premium. The risk premiums are also found temporally stable over the full sample and more recent sample period 2010-2015 as evidence by the Fama-MacBeth regressions. The finding suggests that the default risk factor is not a useless factor and due to mispricing, default risk anomaly prevails in the Pakistani equity market.

Optimal Inventory and Price Markdown Policy for a Two-Layer Market with Demand being Price and Time Dependent

  • Jeon, Seong-Hye;Sung, Chang-Sup
    • Proceedings of the Korean Operations and Management Science Society Conference
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    • 2006.11a
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    • pp.142-146
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    • 2006
  • This paper considers a SCM issue concerned with an integrated problem of inventory control and dynamic pricing strategies when demands are price and time dependent. The associated price markdowns are conducted for inventory control in a two-layer market consisting of retailer and outlet as in fashion apparel market. The objective function consists of revenue terms (sales revenue and salvage value) and purchasing cost term. Specifically, decisions on price markdowns and order quantity are made to maximize total profit in the supply chain so as to have zero inventory level at the end of the sales horizon. To solve the proposed problem, a gradient method is applied, which shows an optimal decision on both the initial inventory level and the discount pricing policy. Sensitivity analysis is conducted on the demand parameters and the final comments on the practical use of the proposed model are presented.

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An Optimal Pricing and Inventory control for a Commodity with Price and Sales-period Dependent Demand Pattern

  • Sung, Chang-Sup;Yang, Kyung-Mi;Park, Sun-Hoo
    • Proceedings of the Korean Operations and Management Science Society Conference
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    • 2005.05a
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    • pp.904-913
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    • 2005
  • This paper deals with an integrated problem of inventory control and dynamic pricing strategies for a commodity with price and sales-period dependent demand pattern, where a seller and customers have complete information of each other. The problem consists of two parts; one is each buyer's benefit problem which makes the best decision on price and time for buyer to purchase items, and the other one is a seller's profit problem which decides an optimal sales strategy concerned with inventory control and discount schedule. The seller's profit function consists of sales revenue and inventory holding cost functions. The two parts are closely related into each other with some related variables, so that any existing general solution methods can not be applied. Therefore, a simplified model with single seller and two customers in considered first, where demand for multiple units is allowed to each customer within a time limit. Therewith, the model is generalized for a n-customer-classes problem. To solve the proposed n-customer-set problem, a dynamic programming algorithm is derived. In the proposed dynamic programming algorithm, an intermediate profit function is used, which is computed in case of a fixed initial inventory level and then adjusted in searching for an optimal inventory level. This leads to an optimal sales strategy for a seller, which can derive an optimal decision on both an initial inventory level and a discount schedule, in $O(n^2)$ time. This result can be used for some extended problems with a small customer set and a short selling period, including sales strategy for department stores, Dutch auction for items with heavy holding cost, open tender of materials, quantity-limited sales, and cooperative buying in the on/off markets.

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An Empirical Analysis of Market Power in The Dallas-Forth Worth Milk Market (Dallas-Forth Worth 우유시장의 시장지배력 측정에 관한 연구)

  • KIM, Donghun
    • International Area Studies Review
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    • v.14 no.3
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    • pp.35-60
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    • 2010
  • In this paper, we develop a dynamic structural model based on a dynamic supergame and measure market power for the Dallas-Forth Worth fluid milk market in the U.S. In particular, we compare the conduct parameter estimates from a static model with that from the dynamic model and illustrate bias in the market-power measure in a static model. And we also analyze the cyclical behavior of firm conduct. We find that the conduct parameter in a static model underestimates true market power if firms' behaviors are posited by a dynamic oligopoly game. We also verify that firm conduct in the Dallas-Forth Worth fluid milk market is countercyclical against demand shocks and expected future cost shocks. Our results indicate that the firms' conduct in the Dallas-Forth Worth fluid milk market is consistent with what dynamic oligopoly models predict. This implies that the firms consider not only the contemporary reactions of the other firms' but also future market competition. Therefore, the measurement of market power requires the specification of fully dynamic pricing relationship.

Adaptive Network Pricing Scheme based on the Stackelberg Model (슈타켈버그 모델을 이용한 적응적 네트워크 가격 결정 기법에 대한 연구)

  • Jung, Woo-Suk;Kim, Sung-Wook
    • Journal of KIISE:Information Networking
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    • v.37 no.2
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    • pp.94-98
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    • 2010
  • In this paper, we formalize a new adaptive online price control scheme based on the Stackelberg game model. By using the hierarchical interaction strategy, control decisions in each mechanism act cooperatively and collaborate with each other to satisfy conflicting performance criteria. In addition, our dynamic online approach is practical for real network implementation. With a simulation study, the proposed scheme can adaptively adjust the network price to approximate an optimized solution under widely diverse network situations.

Dynamic Hedging Performance and Test of Options Model Specification (시뮬레이션을 이용한 동태적 헤지성과와 옵션모형의 적격성 평가)

  • Jung, Do-Sub;Lee, Sang-Whi
    • The Korean Journal of Financial Management
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    • v.26 no.3
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    • pp.227-246
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    • 2009
  • This study examines the dynamic hedging performances of the Black-Scholes model and Heston model when stock prices drift with stochastic volatilities. Using Monte Carlo simulations, stock prices consistent with Heston's(1993) stochastic volatility option pricing model are generated. In this circumstance, option traders are assumed to use the Black- Scholes model and Heston model to implement dynamic hedging strategies for the options written. The results of simulation indicate that the hedging performance of a mis-specified Black-Scholes model is almost as good as that of a fully specified Heston model. The implication of these results is that the efficacy of the dynamic hedging performances on evaluating the specifications of alternative option models can be limited.

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Dynamic Limit and Predatory Pricing Under Uncertainty (불확실성하(不確實性下)의 동태적(動態的) 진입제한(進入制限) 및 약탈가격(掠奪價格) 책정(策定))

  • Yoo, Yoon-ha
    • KDI Journal of Economic Policy
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    • v.13 no.1
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    • pp.151-166
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    • 1991
  • In this paper, a simple game-theoretic entry deterrence model is developed that integrates both limit pricing and predatory pricing. While there have been extensive studies which have dealt with predation and limit pricing separately, no study so far has analyzed these closely related practices in a unified framework. Treating each practice as if it were an independent phenomenon is, of course, an analytical necessity to abstract from complex realities. However, welfare analysis based on such a model may give misleading policy implications. By analyzing limit and predatory pricing within a single framework, this paper attempts to shed some light on the effects of interactions between these two frequently cited tactics of entry deterrence. Another distinctive feature of the paper is that limit and predatory pricing emerge, in equilibrium, as rational, profit maximizing strategies in the model. Until recently, the only conclusion from formal analyses of predatory pricing was that predation is unlikely to take place if every economic agent is assumed to be rational. This conclusion rests upon the argument that predation is costly; that is, it inflicts more losses upon the predator than upon the rival producer, and, therefore, is unlikely to succeed in driving out the rival, who understands that the price cutting, if it ever takes place, must be temporary. Recently several attempts have been made to overcome this modelling difficulty by Kreps and Wilson, Milgram and Roberts, Benoit, Fudenberg and Tirole, and Roberts. With the exception of Roberts, however, these studies, though successful in preserving the rationality of players, still share one serious weakness in that they resort to ad hoc, external constraints in order to generate profit maximizing predation. The present paper uses a highly stylized model of Cournot duopoly and derives the equilibrium predatory strategy without invoking external constraints except the assumption of asymmetrically distributed information. The underlying intuition behind the model can be summarized as follows. Imagine a firm that is considering entry into a monopolist's market but is uncertain about the incumbent firm's cost structure. If the monopolist has low cost, the rival would rather not enter because it would be difficult to compete with an efficient, low-cost firm. If the monopolist has high costs, however, the rival will definitely enter the market because it can make positive profits. In this situation, if the incumbent firm unwittingly produces its monopoly output, the entrant can infer the nature of the monopolist's cost by observing the monopolist's price. Knowing this, the high cost monopolist increases its output level up to what would have been produced by a low cost firm in an effort to conceal its cost condition. This constitutes limit pricing. The same logic applies when there is a rival competitor in the market. Producing a high cost duopoly output is self-revealing and thus to be avoided. Therefore, the firm chooses to produce the low cost duopoly output, consequently inflicting losses to the entrant or rival producer, thus acting in a predatory manner. The policy implications of the analysis are rather mixed. Contrary to the widely accepted hypothesis that predation is, at best, a negative sum game, and thus, a strategy that is unlikely to be played from the outset, this paper concludes that predation can be real occurence by showing that it can arise as an effective profit maximizing strategy. This conclusion alone may imply that the government can play a role in increasing the consumer welfare, say, by banning predation or limit pricing. However, the problem is that it is rather difficult to ascribe any welfare losses to these kinds of entry deterring practices. This difficulty arises from the fact that if the same practices have been adopted by a low cost firm, they could not be called entry-deterring. Moreover, the high cost incumbent in the model is doing exactly what the low cost firm would have done to keep the market to itself. All in all, this paper suggests that a government injunction of limit and predatory pricing should be applied with great care, evaluating each case on its own basis. Hasty generalization may work to the detriment, rather than the enhancement of consumer welfare.

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OPTIMAL PORTFOLIO SELECTION UNDER STOCHASTIC VOLATILITY AND STOCHASTIC INTEREST RATES

  • KIM, MI-HYUN;KIM, JEONG-HOON;YOON, JI-HUN
    • Journal of the Korean Society for Industrial and Applied Mathematics
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    • v.19 no.4
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    • pp.417-428
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    • 2015
  • Although, in general, the random fluctuation of interest rates gives a limited impact on portfolio optimization, their stochastic nature may exert a significant influence on the process of selecting the proportions of various assets to be held in a given portfolio when the stochastic volatility of risky assets is considered. The stochastic volatility covers a variety of known models to fit in with diverse economic environments. In this paper, an optimal strategy for portfolio selection as well as the smoothness properties of the relevant value function are studied with the dynamic programming method under a market model of both stochastic volatility and stochastic interest rates.