Exploring Price Elasticity to Optimize Posted Prices in e-Commerce
Research output: Contributions to collected editions/works › Article in conference proceedings › Research › peer-review
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e-Business and Telecommunications. ed. / Mohammad S. Obaidat; Joaquim Filipe. Berlin, Heidelberg: Springer Verlag, 2011. p. 71-81 (Communications in Computer and Information Science; Vol. 130 CCIS).
Research output: Contributions to collected editions/works › Article in conference proceedings › Research › peer-review
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RIS
TY - CHAP
T1 - Exploring Price Elasticity to Optimize Posted Prices in e-Commerce
AU - Funk, Burkhardt
N1 - Conference code: 6
PY - 2011
Y1 - 2011
N2 - Price dispersion in the Internet has attracted attention from practitioners and academics alike, since it enables companies to adjust prices to a level appropriate to their strategy. This paper demonstrates how Internet retailers can optimize short-term profitability by determining the price elasticity of demand based on empirical price tests. For this purpose visitors of an Internet retailer are divided into subgroups of approximately same size and identical characteristics. Using A-B tests different prices are shown to each subgroup and the conversion rate as a function of price is calculated. We describe the organizational requirements, the technical approach, and the statistical analysis applied to determine the price optimizing the per-order profit. A field study carried out with a large Internet retailer is presented and shows that the company was able to optimize the analyzed price component and thus increase the contribution margin per visitor by about 7%. We conclude that the discussed method could be applied to answer further research questions such as the temporal behavior of demand curves.
AB - Price dispersion in the Internet has attracted attention from practitioners and academics alike, since it enables companies to adjust prices to a level appropriate to their strategy. This paper demonstrates how Internet retailers can optimize short-term profitability by determining the price elasticity of demand based on empirical price tests. For this purpose visitors of an Internet retailer are divided into subgroups of approximately same size and identical characteristics. Using A-B tests different prices are shown to each subgroup and the conversion rate as a function of price is calculated. We describe the organizational requirements, the technical approach, and the statistical analysis applied to determine the price optimizing the per-order profit. A field study carried out with a large Internet retailer is presented and shows that the company was able to optimize the analyzed price component and thus increase the contribution margin per visitor by about 7%. We conclude that the discussed method could be applied to answer further research questions such as the temporal behavior of demand curves.
KW - Informatics
KW - Conversion rates
KW - Demand curves
KW - Field studies
KW - Internet retailers
KW - Price dispersion
KW - Price elasticity
KW - Price-elasticity of demand
KW - Research questions
KW - Temporal behavior
KW - Price Discrimination
KW - Contribution Margin
UR - http://www.scopus.com/inward/record.url?scp=84872114487&partnerID=8YFLogxK
U2 - 10.1007/978-3-642-20077-9_5
DO - 10.1007/978-3-642-20077-9_5
M3 - Article in conference proceedings
SN - 978-3-642-20076-2
T3 - Communications in Computer and Information Science
SP - 71
EP - 81
BT - e-Business and Telecommunications
A2 - S. Obaidat, Mohammad
A2 - Filipe, Joaquim
PB - Springer Verlag
CY - Berlin, Heidelberg
T2 - 6th International Joint Conference on e-Business and Telecommunications - 2009
Y2 - 7 July 2009 through 10 July 2009
ER -