Pricing

American Airlines Value Pricing In 1992, the American Airlines (AA) was ranked as one of the biggest commercial carriers in the United States. The industry included advancements with inflight technology along with new and approved software application that pioneered the introduction of electronic airline advance booking systems. On the contrary, it may have exceeds technology expectations, the airlines and the industry as whole, was not able to meet or gain profit margins and meet customer’s…

make to address the problem of fierce pricing rivalry in the airline industry? American should pursue a three-pronged strategy: 1) Drive low-cost competitors out of the market through pricing pressure 2) Acquire/ merge with other significant players to secure greater bargaining power 3) Seek favorable regulation such that “sharpshooters” are not allowed to pick-off its most profitable routes Driving low-cost competitors out of the market through increased pricing pressure will remove the…

consequences like lowering profit margins, the negative psychological effects a lower price plays on a consumer, and the effect it would have on brand perceptions. Given these negative effects the company should consider promotional pricing strategies or a geographical pricing strategy. Firstly lowering a products price has a direct effect on the profit margin and profit you make in your company. When lowering the price of a product you would make less revenue per product while not lowering…

main product which brings the main revenue is their rooms. Price (Hilton Hotel) Pricing strategy used by the Hilton Hotel Kuala Lumpur is divided into four categories. The pricing strategy matrixes are economy, penetration, skimming and premium pricing. Economy pricing strategy is selling product of their basic structure and characteristics to the customers, with their lowest price. On the other hand Penetration pricing strategy is offering customers the highest quality product and services…

Variations in the cross-sectional stock returns drive abnormal returns from momentum investments (Choi & Kim, 2014). The Capital Asset Pricing Model explains such variations (Alhenawi, 2015). In the method of constructing momentum portfolios, past stock performance and expected average returns were found positively correlated (Jegadeesh & Titman, 1993, 2001). The correlation between winner returns and loser returns resulted in momentum profits (Alphonse & Nguyen, 2013). This section is an…

Alternative Asset Pricing Models Arbitrage Pricing Theory (APT) was developed by Stephen Ross (1976) as an alternative model to overcome some of the weaknesses that have been found in the CAPM. The APT is based on the Law of One Price. This means that if two assets have the same risk, theoretically they should have the same expected returns. If their expected returns differ, arbitrageurs would be able to create a long-short trading strategy that would have no initial cost, but would provide…

is unlimited borrowing and lending at a riskless rate. The investor can decide to lend or borrow any amount of funds desired at the rate of interest equals to the rate for riskless securities. The eighth and ninth assumption of the Capital Asset Pricing Model (CAPM) is that it deals with similarity of expectations. Firstly, investors are assumed to be concerned about the mean and variance of returns(or prices over a single period), and all the investors are assumed to define the relevant period…

examined the CAPM and discovered that the beta can not explicate the cross-section stock returns (CSSR). Moreover, F&F (1992) conducted a test, from 1962 to 1989, on the American Stock Exchange (AMEX), (NYSE), and the National Association of Securities Dealers Automated Quotations (NASDAQS). This study found that the BTMR was an effective variable in explicating the average CSSR. 1.1.3. Earning price ratio (EPR) and debt to equity ratio (DER) Factors In addition to the three factors…

2.1 Theoretical literature review The Capital Asset Pricing Model (CAPM) was formulated by Sharpe (1964) as well as Lintner (1965) following the work of Markowitz (1959). Since then it has produced amazing achievement because its simplified approach attracted many researchers. In spite of numerous criticisms concerning the validity of the CAPM, it is broadly used in the field of financial economics. Alternatively we have the Arbitrage Pricing Theory (APT), being a less limiting model as opposed…

To understand the issues in this essay, it is important to know what is the Capital Assets Pricing Model (CAPM) and the Arbitrage Pricing Model (APT). According to the publications of Sharpe (1964), Lintner (1965) and Mossin (1966) the CAPM is a basic model of pricing of capital assets, the model offers a set of predictions about an equilibrium of expected return on risky assets. CAPM is one of the basic pillar of financial economy. The CAPM offers a set of predictions concerning about how to…