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This dissertation studies volatility measurement and modeling issues when asset prices are subject to price limits based on Bayesian approaches. Two types of estimators are developed to consistently estimate integrated volatility in the presence of price limits. One is a realized volatility type estimator, but using both realized asset prices and simulated asset prices. The other is a discrete sample analogue of integrated volatility using posterior samples of the latent volatility states. These two types of estimators are first constructed based on the simple log-stochastic volatility model in Chapter 2. The simple log-stochastic volatility framework is extended in Chapter 3 to incorporate correlated innovations and further extended in Chapter 4 to accommodate jumps and fat-tailed innovations. For each framework, a MCMC algorithm is designed to simulate the unobserved asset prices, model parameters and latent states. Performances of both type estimators are also examined using simulations under each framework. Applications to Chinese stock markets are also provided. / Thesis (Ph.D, Economics) -- Queen's University, 2014-01-22 10:29:12.507

This thesis examines formation and adaptation of reference prices by Manitoban farmers. Research shows that preferences are reference-dependent and that marketing decisions are affected by reference prices. Results obtained in this research suggest that Manitoban farmers’ reference prices for grain are formed primarily by a weighted average price and by the highest price indicated in the experiment. Reference prices were found to adapt in the same direction as market prices, where adaptation to increasing prices was found to be larger than adaptation to decreasing prices. When deciding to sell grain, farmers were more likely to sell when they expected prices to decrease over the next month and when their reference price adjusted downwards towards the current price.

In this paper, I empirically identify a new source of price discrimination utilized by airlines, namely, price discrimination based on the day of the week a ticket is purchased. Using unique transaction data, I compare tickets that are identical in every aspect except day of the week purchased (that is, traveling on the same date on the same route on the same airline with the same restrictions on flights with the same load factors and purchased the same number of days in advance), and find that airfares are cheapest when bought on the weekend. The size of this weekend purchase effect varies with distribution channel (online or offline) and how far in advance of departure the ticket is purchased. For transactions occurring more than two weeks before the departure date, offline weekend purchases are 3% cheaper than those made on weekdays, but online purchase prices do not differ significantly throughout the week. Conversely, in the final two weeks before departure, weekend purchases are 4% less expensive online but not significantly cheaper offline. These findings are consistent with price discrimination between high-elasticity leisure customers and low-elasticity business customers. If airlines believe that weekend purchasers are more likely to be price-elastic leisure travelers, then they may offer lower prices or make deals more transparent on the weekend. This conjecture is supported by the finding that the weekend purchase effect is generally larger on routes with a mixture of both business and leisure customers than on routes primarily traveled by leisure customers because price discrimination is both possible and effective on these heterogeneous routes.

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This thesis examines formation and adaptation of reference prices by Manitoban farmers. Research shows that preferences are reference-dependent and that marketing decisions are affected by reference prices. Results obtained in this research suggest that Manitoban farmers’ reference prices for grain are formed primarily by a weighted average price and by the highest price indicated in the experiment. Reference prices were found to adapt in the same direction as market prices, where adaptation to increasing prices was found to be larger than adaptation to decreasing prices. When deciding to sell grain, farmers were more likely to sell when they expected prices to decrease over the next month and when their reference price adjusted downwards towards the current price.

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Advances in information technologies have increasingly enabled firms to use consumers' past purchasing data to charge different prices to its own customers and to those customers that in some sense belong to the rival firm. At first glance this new form of price discrimination seems to be lucrative as it allows a firm to generate profitable incremental sales without damaging profits it can extract from its own customer base. However, as behaviour-based price discrimination gains popularity many interesting questions arise. Is it, really, in the best interest of firms to recognise customers with different past behaviour and to price discriminate accordingly? Or is it rather in their interest to avoid any possible learning and thereby price discrimination practices? Should consumers hide their true types, i.e., should they behave anonymously? Further, should government regulation restrict information collection and price discrimination practices? The study of these questions is the study of the profit and welfare effects of behaviourbased price discrimination. This is the central issue of this thesis. With that in mind, this thesis addresses three theoretical models. The first one is based on the hypothesis that the ability of firms to predict the preferences of individual customers for the purpose of price discrimination is less than perfect but is constantly improving due to advances in information technologies. Here the main goal will be to investigate how profits, consumer surplus and welfare evolve as price discrimination is based on more accurate information. The second model is a natural sequel of the former as it tries to model how firms might obtain a signal of a consumer's preferences. Whether or not a given consumer bought from the firm previously might be used as an accurate signal of a consumer's preferences. A key issue here will be to examine whether or not it is in the interest of firms to avoid learning and price discrimination and how can they attain that goal. Finally, the third model studies the interaction between purely informative advertising and price discrimination based on customers' past behaviour. As without advertising consumers are left out of the market, the welfare effects of price discrimination are guided by how will price discrimination affect each firm's advertising decisions in relation to the social optimal level of advertising.