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This paper sets out to consider the problem that the initial value of the American option is less than its fair price; this implies that the replication portfolio does not exist in the market.

The paper develops an optimization model whose solution provides an optimal strategy for the writer to minimize the expected loss for this problem.

The numerical results reveal that loaning money to construct a replication portfolio may not be an optimal strategy for the writer.

The solution of the minimum expected loss model provides an optimal strategy to construct a lower expected loss portfolio.

The numerical results reveal that loaning money to construct a replication portfolio may not be an optimal strategy for the writer.

This paper aims to investigate the effect of retailers’ consumer communications in prompting the choice of an in-stock alternative to an out-of-stock first-choice product.

Four between-subjects experiments assessed the extent to which the likelihood of a retail customer switching to a similarly-priced alternative when a first choice was out-of-stock was affected by messages concerning stockout status (Studies 1a and 1b). They further examined the interaction effects on participants’ preference of messages comparing the available versus unavailable options and stating stockout status (Study 2) and those giving information on the reasons for the stockout and on its status (Study 3).

Participants maintained their original preference for an out-of-stock product unless an external restriction on choice prompted them to forsake it or they perceived a strong reason to opt for an in-stock alternative. There was a greater tendency to switch if the alternative offered a potential “gain” or the reasons given for a stockout were irrelevant to product performance, whether the participant was expecting imminent re-stocking. Switching was triggered when the available alternative was directly comparable to the original or the retailer’s explanation related to an attribute judged trivial, but only if short supply was expected to continue.

The studies add to current understanding of how shoppers respond to unavailability of a first-choice product by examining the effect on switching behavior of messages about the stockout situation that are communicated deliberately or inadvertently by retailers.

The purpose of this paper is to investigate consumers’ responses to unsolicited cross-selling of supplementary paid-for services made during delivery of a core service, and the contextual and personal variables moderating those responses.

Three formal experiments test the effect on participants’ responses of the perceived relevance of the supplementary service to the core service, personal psychological reactance, in the case of a high-relevance supplementary service, and self-monitoring, in scenarios in which a low-relevance supplementary service is proposed either in public or privately.

The experiments found that participants’ satisfaction ratings were reduced in response to cross-selling of a supplementary service that was of low relevance to the core service, and that satisfaction ratings if it was perceived to be of high relevance compared were not reduced despite the unsolicited attempt at cross-selling. However, the non-negative response to a high-relevance offer was limited to participants with a lower tendency to reactance. Furthermore, a high predisposition to self-monitoring evoked more positive judgments if a low-relevance supplementary service was proposed in public rather than privately. That of low self-monitors was no different in either case.

This paper examines the trade-off faced by a service provider between customer satisfaction and extra revenue from supplementary services, and explores conditions under which a provider can propose unsolicited supplementary services without offending customers.

Based on the concept of information salience, the research investigates the factors that might drive potential differences in consumers' preferences between offers framed as free with purchase or as a bundle.

Four experiments examined how participants' preferences for bundled offers or free-with-purchase offers varied as a function of the perceived benefits to be obtained from the supplementary products (studies 1a and 1b) and identified participants' sensitivity to the price of the supplementary component as a mediator of the framing effect of a promotional offer (study 2) and the provision of information facilitating the drawing of comparisons as the boundary condition constraining the effectiveness of a free-with-purchase offer (study 3).

Results show that a bundled offer is preferable to a free-with-purchase offer when the supplementary product provides a high-level rather than a low-level benefit and identify price sensitivity as an underlying mechanism behind the observed effect. Furthermore, consumers' sensitivity to the value of the focal product in the deal brought to their attention by comparative information makes a fair charge for a relatively unattractive component the preferable offer.

While much of the existing published research on bundled offers focuses on the assigning of discounts to individual products in the bundle, this study adds to the body of knowledge by showing that variation in perceived benefits is the key driver of different responses to a free-with-purchase offer versus a bundled offer.