Research On The Pricing And Price Transmission Theory

Price is the core of the market economy and modern economics. Each product in the market is circulated with the price labeled on it. Although numerous research have been done to the price theory, new pricing problems are continuing to challenge traditional theory, especially in pric-ing theory and price transmission theory.This dissertation explores these two theories by doing research on the pricing of air transportation market and corn-pork price transmission.Price can be divided into two parts:cost and profit. Cost can be divided into variable cost and fixed cost. Profit is determined by demand and supply. Various products in the market have their own characteristics with the price,cost and profit,resulting various pricing mechanism. This dissertation selects the pricing of air industry as the direct background and hopes the method developed in this industry can be applied to many other industries due to many representative characteristics of the air industry. The research begins with analysis of the cost structure of the air flight. Then the cost-price function and the profit-price model have been built. Therefore,we can find the appropriate price for a prespecified reasonable profit rate. A numeric method is proposed to demonstrate the feasibility of this pricing model.Price transmission theory explains the mechanism of the price transmission from up-stream price to down-stream price, which consists of two questions:how does the down-stream price respond to the change of the up-stream price? What is optimal decision of the regulator to control the transmission? Assuming a change to the up-stream price, the research of price transmission focuses on the manufacturers' behavior and also many other factors that affect the price transmis-sion process, such as production period, stock or retailers' behavior, etc. After the discussion of the general price transmission process, this dissertation develops a complete model system to the corn-pork example.With the sub-models developed to demonstrate the behaviors of the manufac-turers,retailers and the government, the equilibrium of the market and the connections of prices between different time periods can be analyzed, and the effect of the change of the up-stream price on the change of the down-stream price can be demonstrated.The main contribution of the thesis is listed as follows: (1) Develops a bas-price pricing model for the air industry. Compared to the traditional pricing way, the new model considers the relationship of price and cost, which help to make more accurate decisions on base-price for any prespecified profit rates.(2) Develops a complete model frame for the price transmission process. The model includes submodels to describe the behaviors of market participants such as manufacturers, retailers and government. Due to this model, many factors affecting the transmission process can be com-pletely analyzed. The model includes the time factor in the price transmission model so that the model is dynamic other than the traditional static way. The model includes the government behavior in the price transmission model so that the effect of government policies on the trans-mission process can be understood and the optimal government policies can be found.