Browsing by Subject "pricing"

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  • Mauring, Eeva (2010)
    This thesis analyses the evolutionary stability of different matching and pricing mechanisms. The aim of the thesis is to determine the evolutionary stable structure of an economy where buyers and sellers have a choice between a symmetric random matching and an asymmetric efficient matching market that differ in pricing mechanisms. Additionally, a stability property of an asymmetric market, where buyers differ in their possibility of meeting a seller, is studied. Two efficient markets with different pricing mechanisms are compared to a random matching market where prices are set by auctions. All the possible matches are made in the efficient markets. In the first comparison, prices are set by bargaining in the efficient market. In the other efficient market, prices are set via altered auctions. In neither of the comparisons can the random matching and an efficient matching market function simultaneously in an evolutionary stable equilibrium configuration. In the first comparison, the asymmetric efficient bargaining market structure is evolutionary stable if the ratio of buyers to sellers in the economy is small. The random matching market with auctions is evolutionary stable if the ratio is large. For intermediate values of the ratio, the starting state of the economy determines the stable equilibrium that the economy reaches. In the second comparison, the efficient market with altered auctions is always evolutionary stable over the random matching market with standard auctions. An asymmetric market is analysed further, by treating efficiently matched and consumers without the advantage of a determinate match separately, to determine the share of sellers that choose to serve consumers restricted from certain matching. The results show that the determinate matching market breaks down at a quite low ratio of restricted buyers to matched buyers. The evolutionary stability of different equilibrium pricing mechanisms in a random matching setting has been studied earlier. Lu and McAfee (1996) and Halko et al. (2007) respectively show that auctions are the evolutionary stable pricing mechanism when compared to bargaining or altered auctions. Kultti and Takalo (1999) demonstrate that auctions retain their superiority over bargaining if agents can choose to search or wait. The thesis uses a mathematical model to depict the economy, that is markedly similar to models of the abovementioned authors. The specifications of the matching and the pricing procedures are from search-theoretic models. The equilibrium selection criterion is the evolutionary stability of an equilibrium, which comes from evolutionary game theory. Replicator dynamics are applied to depict dynamic adjustment processes and to determine evolutionary stable equilibria in the comparisons.
  • Huuki, Hannu; Svento, Rauli (Springer, 2020)
    NETNOMICS: Economic Research and Electronic Networking 21, 37-58
    We study the dynamic optimization of platform pricing in industries with positive direct network externalities. The utility of the network for the consumer is modeled as a function of three components. Platform price and participation rate affect the consumer’s decision to join the platform. The platform operator is assumed to know the consumer’s sensitivities with respect to these components. In addition, the consumer’s utility is a function of other attributes, such as network privacy policies and environmental effects of the service. We assume that the distribution of these unobserved preferences in the potential customer base is known to the platform operator. We show analytically how the unobserved preferences affect the dynamic platform price design. Both static and rational expectations with respect to the platform participation are presented. We simulate an electricity market demand side management service application and show that the platform operator sets low prices in the launch phase. The platform operator can set higher launching prices if it can affect customers’ preferences, expectations or adjustment friction.
  • Ukkonen, Aino; Sahimaa, Olli (Elsevier, 2021)
    Waste Management 135 (2021), 372-380
    Municipal solid waste is associated with different systemic challenges, such as climate change, resource scarcity, and ocean plastic pollution. European countries are striving towards more circular material use and the European Commission has advocated the use of economic incentives to boost recycling. The pay-as-you-throw (PAYT) scheme is an economic instrument that applies the ‘polluter pays’ principle by charging for waste according to the actual amount of generated waste. Volume-based PAYT fees have shown to be potentially less effective in waste prevention and recycling than weight-based fees. This paper illustrates how waste management operators can price residual waste with weight-based fees that encourage recycling, are fair with respect to service levels, and cover the current income for municipal waste operators. The result, obtained by forming equations satisfying the above conditions, is a model with a linear, discrete price function, where the price of the residual waste generated by the citizen is a function of the service level. This model encourages efficient source separation through internal subsidies, wherein a citizen can decrease the price of household waste by 32% if they increase the sorting efficiency from a default of 40% to 80% efficiency. The application of the model was illustrated in a case example. The model developed in this study can be used to implement weight-based PAYT schemes locally, thereby supporting the formulation of waste management systems that facilitate waste reduction and recycling.