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: | Xiong Chengjie, Zhu Kejun |
Keywords: | pricing |
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.