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On the optimality of the full cost pricing

[journal article]

Thépot, Jacques; Netzer, Jean-Luc

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Please use the following Persistent Identifier (PID) to cite this document:http://nbn-resolving.de/urn:nbn:de:0168-ssoar-264064

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Abstract This article is aimed at defining the full-cost pricing as a leader-follower game in two-tier organizations: (i) the upstream unit fixes the production capacity and uses it as a cost driver to compute the average cost; (ii) the downstream unit operates on the market and chooses the output level on the basis of the average cost. In the Cournot oligopoly case, the full-cost pricing is compared with other pricing rules. There exists a wide range of values of the fixed cost, for which the full-cost pricing dominates any other pricing rules, in terms of gross profit.
Classification Management Science; Financial Planning, Accountancy
Free Keywords Full-cost pricing; Imperfect competition; Strategic effects
Document language English
Publication Year 2008
Page/Pages p. 282-292
Journal Journal of Economic Behavior & Organization, 68 (2008) 1
DOI http://dx.doi.org/10.1016/j.jebo.2008.04.007
Status Postprint; peer reviewed
Licence PEER Licence Agreement (applicable only to documents from PEER project)