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Suppose that an isolated colonist has just reaped his grain crop. The yield is five full sacks. He destines each sack for a specific purpose: the first sackful of grain must serve him to survive, the second one to keep him in full strength, the third will serve as fodder for his poultry, enabling him to enrich his diet with meat. He plans to use the fourth for distilling corn brandy, a luxury to him. For lack of better he destines the fifth sackful of grain for feeding his parrots: their antics amuse him. So, unmistakably, the five uses are of diminishing importance to him.

This research estimates a multi-product flexible cost function of airport variable costs. Data for the analysis are a panel of 50 airports from 1996 to 2008. Output includes domestic and international departures, non-aeronautical operating revenues, and the number of transport workload units, where a workload unit is a passenger or the equivalent of a 220 pound packet of cargo. The quasi-fixed factor is the equivalent number of 10,000′ × 150′ runways at an airport. After correcting for first-order serial correlation, the analysis finds that airports operate under constant returns to runway utilization and multi-product decreasing returns to scale, production technology is consistent with product specific returns to capacity utilization and anti-complementarity across outputs, and general airport operations have input substitution possibilities with personnel and contractual repair/maintenance inputs. The study also finds 1.05% technology progress over the sample period, due to strong growth prior to 2001, with similar productivity growth rates for large and medium hubs.

Synopsis This paper has two purposes, closely connected with one another. The first is to fill a gap by presenting a consistent theory of block tariffs; the second is to dispel some misconceptions found in the works of standard authors concerning this form of pricing. The main misconceptions here discussed are three in number: first, that the extent to which the consumer's surplus can be exploited depends on the number of blocks; second, that a lower price is necessarily ineffective if it occurs at a quantity which is larger than what the consumer would have bought had the price of the preceding block been valid throughout; and third, that block tariffs may prove inefficient in practice.

This study aims to analytically explore the economic role of transfer pricing in a vertically integrated supply chain with a direct channel, specifically when it uses cost-based transfer prices, as is frequently observed in management practices. We compare two representative transfer pricing methods: full-cost and variable-cost pricing. Although many firms open a direct channel, which affects the optimal decision on transfer prices, prior literature has not considered this case.

We demonstrate the results using a non-cooperative game theoretical approach.

The results show that full-cost pricing is more profitable than variable-cost pricing when the fixed cost allocation to the marketing division is low, contrary to the established position in prior studies, from which I select their benchmark case. Moreover, we obtain a counterintuitive result, whereby, the firm-wide profit of a vertically integrated supply chain increases with fixed cost allocation.

This study considers the direct channel and internal transfer pricing in a vertically integrated supply chain, while prior research only considers one or the other. This model suggests an optimal choice of cost-based transfer pricing in managerial decisions. In addition, the authors demonstrate the positive effect of increasing fixed cost allocation, which prior management studies do not show. The findings of this study have implications for managerial practice by providing insights into supply chain design and showing that firms should consider the competition between channels when making decisions about transfer pricing methods.

The purpose of this paper is to study the influence of different trade modes on the electricity market.

A linear model between power units' output and their bidding prices is presented and optimal models to minimize the purchase power cost of power grid companies are presented, applying static games and dynamic games, respectively. Then the relation between power generation amount and units' bidding price is settled by using difference methods. In addition, optimization models are established to optimize profits of units at discriminatory bidding or uniform marginal price applying static game and dynamic game. Finally, the economic benefits and fair competition are compared and analyzed.

If impartiality is emphasized, the detailed history bidding information should not be opened. Also, it is fairer but difficult to control units' speculative behavior at uniform marginal price.

A supposition has been made that all participants are rational.

The paper presents useful advice for improving the trade mode of the electricity market.

Power units' bidding models and strategies are presented at discriminatory bidding price or at uniform marginal price applying non‐cooperation static game and dynamic game, respectively.

In Canada, grain handling is an important agri-business that has traditionally been cooperative in nature (for example, Saskatchewan Wheat Pool). At the same time the industry is heavily regulated. There has been a dramatic change in the structure of the industry over the past 20 years and there are currently no major cooperatives present in the market. If the “yardstick effect” hypothesis of the role of cooperatives in an imperfectly competitive market is true, the disappearance of cooperatives could result in the ability of remaining firms to exercise market power over producers. To investigate the impact of changes in ownership structure in the market, we estimated two types of pricing games that might have been played between a cooperative, Saskatchewan Wheat Pool (SWP) and an investor-owned firm (IOF), Pioneer Grain (PG) in the Saskatchewan wheat-handling market over the period 1980–2004, with different assumptions about their pricing behavior imposed. We find that SWP and PG have likely been playing a Bertrand pricing game in the market over the period. We thus conclude that SWP, as the largest cooperative in the market, likely played a “yardstick effect” role in the market.

The World Health Organization estimated that in 1999 roughly one-third of the world's population lacked access to essential medicines that would have saved or improved their lives. Our analysis focuses on how pharmaceutical product patents restrict access to essential medicines in developing countries. It is well established that pharmaceutical product patents provide little incentive for pharmaceutical companies to develop new medicines designed to treat diseases prevalent in developing countries or to market in developing countries those patented medicines developed to treat diseases prevalent in developed countries. Economists have developed theoretical models showing that these incentives could be changed if (1) developing countries provided intellectual property protection for new pharmaceutical innovations and (2) an international regulatory framework were established to facilitate pharmaceutical companies setting lower prices in developing countries and higher prices in developed countries for patented medicines. We develop an index of property rights in pharmaceutical innovations covering 129 countries from 1960 to 2005. It shows that in 1960 only a handful of countries provided significant protection for pharmaceutical innovations, but by 2005 over 95 percent of countries in our sample provided significant statutory protections. However, an international framework to allow pharmaceutical companies to price discriminate has not been put in place. We conclude that international price discrimination mechanisms, compulsory patent licenses, and regional patent buyouts are not viable mechanisms for providing access to essential medicines to patients in developing countries. Global patent buyouts are more likely to achieve this goal, as they are not founded on an impractical separation of pharmaceutical markets in developing and developed countries and they provide critical incentives to develop new essential medicines.