Technical Note - Pricing Below Cost Under Exchange-Rate Risk

• 成果类型: Article
• 署名作者: Park, John; Kazaz, Burak; Webster, Scott
• 署名单位: Syracuse University; Arizona State University; Arizona State University-Tempe
• 刊物名称: PRODUCTION AND OPERATIONS MANAGEMENT
• ISSN/ISSBN: 1059-1478
• DOI: 10.1111/poms.12405
• 发表日期: 2016
• 页码: 153-159
• 关键词: Newsvendor problem

摘要

Pricing below cost is often classified as dumping in international trade and as predatory pricing in local markets. It is legally prohibited from practice because of earlier findings that it leads to predatory behavior by either eliminating competition or stealing market share. This study shows that a stochastic exchange rate can create incentives for a profit-minded monopoly firm to set price below marginal cost. Our result departs from earlier findings because the optimal pricing decision is based on a rational behavior that does not exhibit any malicious intent against the competition to be considered as violating anti-trust laws. The finding is a robust result, because our analysis demonstrates that this behavior occurs under various settings such as when the firm (i) is risk-averse, (ii) can postpone prices until after exchange rates are realized, (iii) is capable of manufacturing in multiple countries, and (iv) operates under demand uncertainty in addition to the random exchange rate.