Statistical model and estimation of the optimum price for a chain of price setting firms

Statistical model and estimation of the optimum price for a chain of price setting firms

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Article ID: iaor20062132
Country: United States
Volume: 4
Issue: 2
Start Page Number: 553
End Page Number: 566
Publication Date: Nov 2005
Journal: Journal of Modern Applied Statistical Methods
Authors: ,
Keywords: pricing
Abstract:

A stochastic approach is used to model the economics of a chain of price setting firms. It is assumed that these firms have fixed capacities in their products, but random demands for their products. The optimum price, the optimum revenue, and the expected marginal revenue at a given price are investigated. The method of maximum likelihood is used to provide both point and confidence interval estimates. The coverage probabilities of confidence interval estimates based on a simulation study are presented.

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