An experimental pricing framework for E-commerce

Vatsa, Puneet
Ma, Wanglin
Zhou, X
Journal Article
Fields of Research
ANZSRC::3801 Applied economics , ANZSRC::380203 Economic models and forecasting , ANZSRC::350610 Pricing (incl. consumer value estimation) , ANZSRC::3503 Business systems in context , ANZSRC::3506 Marketing , ANZSRC::4609 Information systems
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.
© 2021 by the authors. Licensee MDPI, Basel, Switzerland.
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