"In an efficient market all identical goods must have only one price." So states the aptly named law of one price. In the real world, however, one may easily verify that identical products are often sold for different prices. This thesis develops an extension of the Bertrand model in economics to include spatially localised competition to explain this price variation, which is then studied through simulation methods and theoretical analysis. Our model studies the effect that local heterogeneities in the environment experienced by sellers have on successful pricing strategies. Taking inspiration from models of evolutionary dynamics, we define the fitness of a seller and evolve seller prices through selection and mutation. We find three distinct steady states in our model related to the probability that a seller experiences competition for a buyer, mediated by the number of bankrupt sites in the system. When competition-free sales are unlikely, the system collapses on to a single price. If temporary monopoly situations do exist sellers can accumulate capital and variation in prices is stable. In this scenario, sellers spontaneously separate into two classes: cheap sellers – requiring sales to every potential buyer; and expensive sellers – requiring only occasional sales. Finally, we find an intermediate regime in which there is a single highly favoured price in the system which oscillates between high and low extrema. We study the properties of these steady states in detail, building a picture of how globally uncompetitive sellers can nonetheless survive if competition is strictly local. We show how the system builds up correlations, leading to niches for expensive sellers. These niches change the nature of the competition and allow for long-term survival of uncompetitive sellers. Not all expensive prices are equally likely in the steady state and we analyse why (and where) peaks in the price distribution appear. We can do this exactly for the early time dynamics of the model and extend the argument more qualitatively to the steady state. This latter analysis allows us to predict, for an observed steady distribution, the minimum price an expensive seller should charge to guarantee profit. The oscillatory ‘steady state’ is qualitatively reminiscent of boom and bust cycles in the global market. We study methods to suppress the oscillations and suggest ways of avoiding catastrophic crashes in the global economy – without negatively affecting the ability of outliers to make large profits.

This dissertation analyzes information, market structure, and firm pricing strate-gies. I begin the dissertation with an analysis of the market structure of the mortgage in-dustry. I find that the configuration of the mortgage market at its present state is vastly different than its historical structure. The reduction in the cost of transmitting informa-tion has increased the collaborative environment and facilitated the dis-integration of the supply chain. Generally, the mortgage industry has been successful at reducing principal-agent problems and minimizing asymmetric information concerns that arise in segmented markets. In the first essay I provide a theoretical explanation of the effect of the internet on market outcomes. Search models assume that the reduction in search frictions would lead to competitive markets. However, I argue that gatekeepers operating in online markets may create an anticompetitive effect, in addition to reducing the consumers’ search cost. Therefore, the conduct of the gatekeeper can cause prices in online markets to be higher than in retail markets and provide online firms with larger profits. In the second essay “I empirically examine the role of the internet and Internet Comparison Search sites in reducing consumer search costs and their effects on the prices consumers pay for mortgages. Additionally, I expand the study to test for the effects of the internet on firm profits. Using a unique data set, I examine a mortgage firm’s pricing strategies and profits in online and retail markets, and find evidence of market power in online markets that do not exist in retail markets. The presumed benefits to the consumer from the reduction of search cost are offset by the anticompetitive environment in online markets. In the final essay, I examine a mortgage firm’s portfolio choice. I investigate the loan characteristics that affect the firm’s decision to retain mortgages as part of its own portfolio. I find that the decision to retain loans as a lender is driven by unobservable qualities. The firm does sort loans by quality, but it also prices non-brokered loans lower based on unobservable qualities. The sorting behavior suggests that asymmetric information exists between the lender and the secondary market.

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Syfte: Syftet med denna studie är att beskriva resonemang som förs i livsmedelsbutiker kring prissättningsstrategier på färskvaror, och vilken roll matsvinn spelar i detta sammanhang. Teoretisk referensram: I detta kapitel redovisas olika faktorer som kan ha effekt på val av prissättningsstrategier. Därför presenteras tidigare studier om olika prissättningsstrategier samt effekter på matsvinn och lönsamhet. Även institutionella teorin beskrivs, vilken förklarar krafter som kan påverka organisationers beteenden. Denna teori kan därmed hjälpa till att förklara varför prissättare i livsmedelsbutiker resonerar som de gör gällande prissättning och matsvinn. Metod: För att uppfylla syftet med studien har en kvalitativ ansats tillämpats. Besöksintervjuer har genomförts i sex olika ICA-butiker med anställda som har kunskap om prissättning av färskvaror. Butiker av olika storlekar har inkluderats för att möjligtvis kunna upptäcka om en butiks storlek har någon betydelse gällande val av prissättningsstrategier på färskvaror samt hänsyn till matsvinn i dessa. Empiri: Detta kapitel innehåller insamlade data från intervjurespondenterna. Här redovisas deras syn på matsvinn och hur prissättningen i deras butiker går till. Slutsatser: Empirin har analyserats utifrån institutionella teorin samt utifrån lönsamhet då det är en betydande faktor som styr verksamheter. Slutsatserna som framkommit är att faktorer som påverkar vilka prissättningsstrategier som tillämpas och vilken hänsyn som kan tas till matsvinn i dessa är lönsamhet, normer, konkurrenter och tryck från samhället. Det har också visats att endast dynamisk prissättning tillämpas och att butikens storlek inte har någon betydelse för hur de väljer att prisnedsätta. Ännu en slutsats är att butikens storlek inte behöver ha någon betydelse för den hänsyn som tas till matsvinn i prissättningen. / Purpose: The purpose of this study is to describe the reasoning of food retailers about pricing strategies for perishable food, and what role food waste plays in this regard. Theoretical perspectives: This chapter presents various factors that may affect the choice of pricing strategies. Therefore, previous studies about different pricing strategies and their effects on food waste and profitability are presented. The institutional theory is also described, which explains forces that can affect organizations' behavior. This theory can therefore help explain why price setters in food stores argue in the way they do regarding pricing and food waste. Method: To qualify for the purpose of the study, a qualitative approach has been applied. Interviews have been conducted in six different ICA-stores with employees who have knowledge of pricing of perishable food. Stores of different sizes have been included in order to be able to discover if a store’s size has any significance in selecting pricing strategies for perishable food, as well as consideration to food waste in these. Empirical results: This chapter contains collected data from the interview respondents. Information about the pricing strategies applied in the stores of the study, as well as the respondents' views of food waste, are presented. Conclusions: Our empirical results have been analyzed on the basis of the institutional theory as well as profitability as it is a significant factor in managing activities. The conclusions found are that factors affecting the pricing strategies applied and the consideration that can be taken to food waste in these, are profitability, norms, competitors and pressures from society. It has also been shown that only dynamic pricing is applied and that the size of the store does not matter in their strategy of mark downs. Yet another conclusion is that the size of the store does not have any significance for the consideration taken to food waste in the pricing.

The objective of this thesis is to investigate and describe components of pricing system which influence the dynamic performance of a price leader manufacturing firm in an oligopoly capital intensive industry producing an identical intermediate product (s). The synthetic fibre industry is chosen as an illustrative case upon which the discussion is built. However, this work could generally be applied to a wide variety of organizations and situations. After discussing the suitability of system dynamics to the formulation of long-run pricing strategy, a model of the pricing system is constructed by using this technique. The behaviour of this system is examined in terms of feedback loops. That is to illustrate how the characteristics of these loops and the interaction among them affect the dynamic behaviour of the system, and how this behaviour can be improved via changing the components of these loops and/or their structures. The improved system is simulated under different external disturbances, certain parameter changes, and different pricing control policies. The simulation shows that the design of a set of robust pricing policies makes the system insensitive to external disturbance and error in parameters. It also shows that the ability of the firm to attain its growth and profitability objectives is affected by the chosen control pricing policies. Some potential applications of the model, particularly, as planning and training tools are highlighted. It is concluded that System Dynamics is an appropriate approach to the formulation of the long-run pricing strategies.

The first essay investigates how individual characteristics influence sales outcomes for houses they help transact. It develops hedonic housing models to assess the impacts of agent characteristics such as the level of recent and concurrent agent activity on sales outcomes (price and time on market). This is done in a Multiple Listing Service (MLS) setting using seven years of data obtained from a large Midwestern city. I find evidence that more active listing agents sell homes more quickly, though they do so to the detriment of final sales price. I also find that more listings concurrently held by agents have a statistically significant, negative effect on price. Selling agents appear to be quite neutral in the process and have little effect on either sales price or time on market. The second essay defines market concentrations of residential real estate brokerage services across one hundred diverse U.S. markets. Since real estate is immobile, each geographical location constitutes a local market and thus national measures of market concentration, of the type espoused by the National Association of Realtors (NAR), are of little value. The only way to get a meaningful picture of the market in general is to collectively examine observations at the city/town level. Once indices of concentration are obtained, it may be possible to get a sense of minimum and maximum scale efficiencies as well as what market specific characteristics give rise to high or low concentrations. The third essay examines the “just-below” pricing strategy in the context of home sales. Many retailers price their goods/services directly below some round amount (i.e. pricing at $2.99 instead of $3.00) and a number of studies document the effectiveness of this strategy on the demand for relatively inexpensive items (clothing, groceries, small appliances, etc). A lesser developed strand of literature examines the prevalence and effectiveness of just-below pricing in the context of larger purchases, namely real estate. This essay affirms the prevalence of just-below pricing in home transactions and finds evidence that just-below pricing can yield a higher final transaction price compared to homes initially priced on an even price point.

Traditional inventory models focus on risk-neutral decision makers, i.e., characterizing replenishment strategies that maximize expected total profit, or equivalently, minimize expected total cost over a planning horizon. In this paper, we propose a framework for incorporating risk aversion in multi-period inventory models as well as multi-period models that coordinate inventory and pricing strategies. In each case, we characterize the optimal policy for various measures of risk that have been commonly used in the finance literature. In particular, we show that the structure of the optimal policy for a decision maker with exponential utility functions is almost identical to the structure of the optimal risk-neutral inventory (and pricing) policies. Computational results demonstrate the importance of this approach not only to risk-averse decision makers, but also to risk-neutral decision makers with limited information on the demand distribution. / Singapore-MIT Alliance (SMA)

Syfte: Uppsatsens syfte är att klargöra skillnaden mellan olika sorters rabatterade erbjudanden som kampanj och rea i Ur&Penns butiker. Syftet är även att se hur konsumenter ser på rabatterade erbjudanden och hur deras lojalitet kan påverkas av detta. Metod: En kombination av kvalitativa och kvantitativa metoder har använts med en abduktiv ansats. Insamling av data har skett via enkäter, intervju och observation. Uppsatsen riktar sig in på att undersöka Ur&Penns marknad. Teori: Teorier som använts i uppsatsen beskriver prisstrategier, rabatterade erbjudanden, lojalitet ur konsumentperspektiv samt tar upp utsnitt ur marknadsföringslagen. Empiri: Empirin består av tre delar: webbenkät, intervju och en observation. Webbenkäten är skapad ur ett konsumentperspektiv medan intervjun är ur ett företagsperspektiv. En direkt observation har utförts av författarna. Slutsats: Det finns både negativa och positiva aspekter för både konsumenter och företag när det gäller rabatterade erbjudanden. Skillnaden mellan kampanj och rea är uppenbart i fakta men inte lika tydlig när det kommer till att se skillnaden i butik. Rabattaktiviteter används i butiker för att locka kunder till att handla. En stor del av våra respondenter uppfattar nedsatta priser som någonting positivt.

Due to the sharpen regulation of the Swedish plain vanilla warrant in 2006 and the recent increase in trade among private investors, this thesis examined the informa-tion efficiency of Swedish plain vanilla warrants. This was done in three different ways. First the theoretical Black & Scholes (B&S) price was tested against the ac-tual market price. Secondly likelihood ratio test statistics was used to see whether information regarding past returns added any information to that already captured by the implied volatility (IV) generated from observed warrant market prices via the B&S model. The third method used was a comparison of the IV´s among com-parable warrants. As the regulation of the Swedish plain vanilla warrant market states that only certified issuer are allowed short calls and puts, the self adjusting price mechanism found in the option market doesn’t exist on this market. As a con-sequence of this, investors on this market is reliant of accurate ask and bid prices from the issuers. Further, the information efficiency of a capital market is of es-sence for capital allocation, price discovery and risk management. The results from all three tests rejected the information efficiency hypothesis of the sample. Thus concluding that the included warrants in this thesis are none ideally for activities such as capital allocation, price discovery and risk management.

The goal of this thesis is to provide a reader with a comprehensive outlook on the cost-pricing process in a real FMCG company. Firstly, the thesis concentrates on the theoretical background of cost methodologies and pricing strategies from a perspective of a private firm. Secondly, the thesis presents a tool, which calculates the reflection of the change in the commodity cost on the shelf price of a good. Thirdly, statistical testing is applied in order to identify if the model could correlate with reality based on historical data. In this part the thesis discusses the limitations of the model and gives more real life examples of how the price is set, besides the commodity influence. Thanks to it, a reader will be able to draw conclusions from the given information and deeper understand the complexity of the FMCG market industry.