Article Abstract:
A simulation modeling capability, SIMSTRAT, wherein analytical solutions are exchanged for more realistic representations of supply and demand, is described. The model can successfully identify conditions favorable to skim and penetration pricing strategies when combined with new computer graphics. Current literature is reviewed. The SIMSTRAT is used to supercede restrictions in environments included in analytical models. SIMSTRAT utility is investigated through hypothesis of short-run maximization problems' link to substantial sub-optimal long-term profits and if short-term profit maximization does not, certain pricing rules are functional. Tables of major strategic pricing papers data, mathematical formulations for SIMSTRAT strategies which include myopic, skimming, and penetration and tables and graphs of model output and distribution are included. The model employs analysis of variance. Several comments on the article follow it.
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Article Abstract:
Present theories of price behavior and price markups, such as the Administrated Price Hypothesis and Wage-Cost Markup models, hold that: markups never decline during the expansion period of a business cycle, prices are more stable in highly concentrated industries, and prices are insensitive to short-term fluctuations and demands in concentrated industries. An alternative theory of markup pricing is presented, which states that markup rises until the middle of the expansion period and then declines, and that markup flexibility has a positive relationship to the amount of competition. The results from regression analyses of pricing data for the postwar period to 1980 support the alternative theory.
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Article Abstract:
The impact of railroad rate deregulation on railroad prices is examined. In 1980, the Staggers Act gave railroads virtually unlimited freedom to establish their own rates. Because previous attempts to measure railroads' profitability using the rate of return have been shown to be inaccurate, the q ratio of a firm's market value to the cost of replacing its assets is used. Using this ratio to measure profitability, it is shown that competition is sufficient to keep railroads from charging monopolistic prices, and that the railroads have not been making supracompetitive profits since deregulation. Increased regulation of railroad rates is therefore unjustified.
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