Narrow Results

According to the marketing principle, a decision maker may control demand rate through selling price and the unit facility cost of promoting transaction. In fact, the upper bound of willing-to-pay price and the transaction cost probably depend upon the subjective judgment of individual consumer in purchasing merchandise. This study therefore attempts to construct a bivariate distribution function to simultaneously incorporate the willing-to-pay price and the transaction cost into the classical economic order quantity (EOQ) model. Through the manipulation of the constructed bivariate distribution function, the demand function faced by the supplier can be expressed as a concrete form. The proposed mathematical model mainly concerns how to determine the initial inventory level for each business cycle, so that the profit per unit time is maximized by means of the selling price and the unit-transaction cost to control the selling rate. Furthermore, the sensitivity analysis of optimal solution is performed and the implication of this extended inventory model is also discussed.

The authors demonstrated in earlier papers that a maximal predictability portfolio (MPP) using a dynamic strategy leads to a significantly better ex-post performance than the one based on a static strategy and the index. In this paper, we will consider a maximal predictability portfolio subject to transaction cost. To reduce transaction cost, we employ turnover constraint. It will be shown that this approach leads to a significantly better performance than the standard MPP and the index.

We study the Markowitz mean-variance portfolio selection model under three types of regularizations: single-norm regularizations on individual stocks, mixed-norm regularizations on stock groups, and composite regularizations that combine the single-norm and mixed-norm regularizations. With mixed-norm regularizations incorporated, our model can accomplish group and stock selections simultaneously. Our empirical results using both US and global equity market data show that compared to the classical mean-variance portfolio, almost all regularized portfolios have better out-of-sample risk-adjusted performance measured by Sharpe ratio. In addition, stock selection and group screening accomplished by adding ${\ell }_1$ and ${\ell }_{2,1}$ regularizations respectively can lead to decreased volatility, turnover rate, and leverage ratio. Yet there are instances in which diversifying across different groups is more favorable, depending on the grouping methods. Moreover, we find a positive correlation between portfolio turnover and leverage. Heavily leveraged portfolios also have high turnover rates and thus high transaction costs.

Subscription pricing strategies are increasingly adopted by crowdsourcing delivery platforms, allowing subscribers to pay a fixed upfront fee for unlimited future services. This paper explores the impact of demand heterogeneity and transaction costs on the comparison between subscription pricing and pay-per-transaction pricing. We construct and solve models to obtain optimal service prices, delivery commissions, and profits under both strategies. Our findings indicate that the subscription strategy is more effective at attracting consumers compared to the pay-per-transaction strategy. Specifically, the subscription strategy can lower commission rates and reduce the number of deliverers required, while generating higher surplus for both consumers and deliverers when transaction costs are high. Moreover, the subscription strategy maintains a profit advantage when demand heterogeneity is low and transaction costs are high. This study offers valuable insights into pricing decisions, strategy selection, and operational performance optimization, aiding delivery service platforms in better targeting consumers and products.

Risk measures for multivariate financial positions are studied in a utility-based framework. Under a certain incomplete preference relation, shortfall and divergence risk measures are defined as the optimal values of specific set minimization problems. The dual relationship between these two classes of multivariate risk measures is constructed via a recent Lagrange duality for set optimization. In particular, it is shown that a shortfall risk measure can be written as an intersection over a family of divergence risk measures indexed by a scalarization parameter. Examples include set-valued versions of the entropic risk measure and the average value at risk. As a second step, the minimization of these risk measures subject to trading opportunities is studied in a general convex market in discrete time. The optimal value of the minimization problem, called the market risk measure, is also a set-valued risk measure. A dual representation for the market risk measure that decomposes the effects of the original risk measure and the frictions of the market is proved.

We model an informed agent with information about the future value of an asset trying to maximize profits when the agent’s trades are subjected to a transaction cost as well as a market maker tasked with setting fair transaction prices. In a single auction model, equilibrium is characterized by the unique root of a particular polynomial. Analysis of this polynomial with small levels of risk-aversion and transaction costs reveal a dimensionless parameter which captures several orders of asymptotic accuracy of the equilibrium behavior. In a continuous time analogue of the single auction model, incorporation of a transaction costs allows the informed agent’s optimal trading strategy to be obtained in feedback form. Linear equilibrium is characterized by the unique solution to a system of two ordinary differential equations, of which one is forward in time and one is backward. When transaction costs are in effect, the price set by the market maker in equilibrium is not fully revealing of the informed agent’s private signal, leaving an information gap at the end of the trading interval. When considering vanishing transaction costs, the equilibrium trading strategy and pricing rules converge to their frictionless counterparts.

Intellectual property (IP) is an exponentially consequential driver of competitive advantage nowadays. We bring in the technical views in the use of SIP technology as a more strategic weapon to elaborate our proposed strategies — design for manufacturability (DFM) adder, and home depot strategies through transaction cost approach that are able to be practically applying in the semiconductor foundry industry with added value by all means. DFM adder strategy is an effective solution specifying wafer processing enhancement while home depot strategy is an entire solution massing on product design integration. More substantially, these strategies are totally awesome mechanisms that can be matching and winning in the evolving marketplace for foundry industry in the 21st century.

There is an ongoing discussion among experts concerning the result of university activities. One point of view is that universities should be considered as places of research and measured by their contribution to science. The aim of research is to formulate a methodological approach to assess scholarship and research productivity in universities based on the assumption that the growth transaction costs define higher education institution knowledge generation. The authors present a proposal of a new ratio, called the Knowledge Generation Efficacy Ratio (KGER), which assesses the research productivity in universities. To test this ratio, an empirical survey was carried out based on data collected from four different universities in Russia. The results of this study contribute to the development of scholarly and research productivity method. The KGER can be used as a tool for making decisions concerning the different research activities taking place in the university, the level of funding and return on investment.

In the paper the trade-offs among endogenous transaction costs caused by two-sided moral hazard, exogenous monitoring cost, and economies of specialization are specified in a Grossman, Hart and Moore (GHM) model to absorb Maskin and Tirole's recent critique and Holmstrom and Milgrom's criticism of the model of incomplete contract. The extended GHM model allowing incomplete contingent labour contract as well as complete contingent trade contract of goods is used to explore the implications of structure of ownership and residual rights for the equilibrium network size of division of labour and productivity.

Developing countries are struggling for finding resources to finance their adaptation to or mitigation of the effects of climate change. In that spirit, the Copenhagen summit, the fifteenth Conference of Parties (COP15) can be seen as a success since it ended with an important promise of creation of a common fund of $US 100 billions per year over the period 2013–2020 to help poor and emerging countries to support adoption of costly but eco-friendly technologies. However, implementation of former instruments shows mixed results. In this paper, we show that transaction costs effect dominates asymmetric information effect in impeding some developing countries to benefit from the clean development mechanism, one of the instruments of the implementation of the Kyoto Protocol. Thus environmental instruments may be useless if they are not supplemented by policies to reduce transaction costs in the host countries.

In the most of the option price dynamics in the financial markets, the transaction cost of option is ignored. Considering the transaction costs will lead to the emergence of models with nonlinear PDE. In this paper, transaction cost of option in the assumed market is considered, and the resulting dynamic is a nonlinear PDE, whose exact and numerical solutions have been computed in the present paper. To find the exact solution of the cited nonlinear equation, the Lie group algebra method has been used. The numerical solution has been given using the Chebyshev spectral method. In this method, the solution of the considered equation is approximated using Chebyshev polynomials. The convergence of the obtained polynomials to the solution of the differential equation has been shown, as well.

US tax laws provide investors an incentive to time the sales of their bonds to minimize tax liability. This grants a tax timing option that affects bond value. In reality, corporate bond investors’ tax-timing strategy is complicated by risk of default. In this chapter, we assess the effects of taxes and stochastic interest rates on the timing option value and equilibrium price of corporate bonds by considering discount and premium amortization, multiple trading dates, transaction costs, and changes in the level and volatility of interest rates. We find that the value of tax-timing option account for a substantial proportion of corporate bond price and the option value increases with bond maturity and credit risk.

We consider the optimal investment and consumption policy for a constant absolute risk averse investor who faces fixed and/or proportional transaction costs when trading a stock and maximizes his expected utility from intertemporal consumption. We show that the Hamilton-Jacobi-Bellman PDE with free boundaries can be reduced to an ODE, which greatly simplifies the problem. Using the stochastic impulse and singular control techniques, we then derive the optimal investment and consumption policy. In particular, when there are both fixed and proportional costs, it is shown that the optimal stock investment policy is to keep the dollar amount invested in the stock between two constant levels and upon reaching these two thresholds, the investor jumps to the corresponding optimal target level.

This paper proves the existence of a general equilibrium in a financial model with transaction costs. A general equilibrium is shown to exist in a model with convex trading technology, in which the agents include consumers, production firms, brokers or dealers. When the trading technology is non-convex, an individual approximate equilibrium, introduced by Heller and Starr (1976), is proved in the above model. And, moreover, under a further assumption of finite p-convexity on the commodity excess demand correspondence, a general equilibrium for a non-convex exchange economy is obtained for an economy with consumers, brokers or dealers.