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An experimental pricing framework for E-commerce

Vatsa, Puneet
; 
Ma, Wanglin
; 
Zhou, X
Date
2021-12
Type
Journal Article
Collections
Department of Global Value Chains and Trade
Keywords
digital products, experimental analysis, pricing strategy, profit maximization
Fields of Research
ANZSRC::3801 Applied economics , ANZSRC::380203 Economic models and forecasting , ANZSRC::350610 Pricing (incl. consumer value estimation)
Abstract
Characterizing the demand curve of products is important for pricing them optimally. However, in deriving empirical demand curves, econometricians have to contend with identification issues. Furthermore, theoretical demand curves derived using standard economic theory are divorced from empirical realities: firms rarely have information on customers’ budget constraints; theoretical utility functions are seldom derived empirically. Recognizing these issues, we propose an experimental approach for determining a product’s demand curve and, in turn, its profit maximizing price in online environments. The proposed approach yields precise estimates and is quick and inexpensive to implement.
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Permalink
https://hdl.handle.net/10182/14267
Source DOI
10.3390/jtaer16070141
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© 2021 by the authors. Licensee MDPI, Basel, Switzerland.
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