We analyze the salient features of networks and point out the similarities between the economic structure of networks and the structure of vertically related industries. The analysis focuses on positive consumption and production externalities, commonly called network externalities. We discuss their sources and their effects on pricing and market structure. We distinguish between results that d...

We consider costly information acquisition in the canonical monopolistic nonlinear pricing model (Mussa and Rosen, 1978; Maskin and Riley, 1984) so that consumers need to incur privately known entry costs in order to learn their preference “intensities” for the quality of the product. We show that by taking into account costly information acquisition, the nature of optimal nonlinear pricing con...

We examine the role of high-frequency traders (HFT) in price discovery. Overall HFT play a positive role in price efficiency by trading in the direction of permanent price changes and in the opposite direction of transitory pricing errors on average days and the highest volatility days. This is done through their marketable orders. In contrast, HFT passive non-marketable orders are adversely se...

We develop a model of providers operating on a Sharing Economy platform where consumers first become aware of a product or service, and then consider adopting it. Past adoptions increase the likelihood that future consumers will discover the provider, but awareness also decays over time. We exhibit that pricing dynamics for products and services of short life span are consistent with penetratio...

For the Internet advertisement market, we consider a contract problem between advertisers and publishers. Among several ways of pricing online advertisements, the methods based on cost-per-impression (CPM) and cost-per-click (CPC) are the two most popular. The CPC fee is proportional to the click-through rate (CTR), which is uncertain and makes decisions of advertisers and publishers difficult....

We find that competition from payday lenders leads depository institutions to raise overdraft fees and reduce the availability of “free” checking accounts. We attribute this rise in prices partly to adverse selection created by banks’ practice of charging a flat fee regardless of the overdraft amount―pricing that favors depositors prone to large overdrafts. Payday credit is priced per dollar bo...

We investigate price mechanism selection in a setting where sellers compete for budget constrained buyers by adopting either …xed pricing or auctions (…rst or second price). We show that …rst and second price auctions are payo¤ equivalent when some bidders are …nancially constrained, so sellers are indi¤erent to adopt either format. We fully characterize possible equilibria and show that if the...

In this paper, we propose a dynamic pricing model, with the objective of maximizing the total expected revenue of a provider of attended home deliveries, while also improving the matches between customers’ preferred delivery time and price and carriers’ desirable time slots and charge fees. The models are formulated to determine the optimal posted price and the minimum acceptable bid price for ...

Many nonlinear option pricing problems can be formulated as optimal control problems, leading to Hamilton-Jacobi-Bellman (HJB) or Hamilton-Jacobi-Bellman-Isaacs (HJBI) equations. We show that such formulations are very convenient for developing monotone discretization methods which ensure convergence to the financially relevant solution, which in this case is the viscosity solution. In addition...

This study examines the determinants of audit fees for companies listed on Alternative Investment Market (AIM) in United Kingdom (UK), which is secondary market London Stock Exchange small and medium sized companies. AIM are expected to present different pricing challenges compared fully firms. From an demand perspective, exhibit risk governance characteristics while, from a supply characterize...