Optimizing price levels in e-commerce applications: an empirical study

Research output: Contributions to collected editions/worksArticle in conference proceedingsResearchpeer-review


Price dispersion in the Internet is a well studied phenomenon. It enables companies to adjust prices to a level appropriate to their strategy. This paper deals with question how Internet retailers should do so. The discussed method optimizes short-term profitability by determining the exact demand curve. The method involves the application of empirical price tests. For this purpose visitors of an Internet retailer are divided in statistically identical subgroups. Using the A-B testing method 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 a specific price component and thus increase the contribution margin per order by about 7%. We conclude that the discussed method could be applied to answer further research questions such as the temporal variation of demand curves.

Original languageEnglish
Title of host publicationICE-B 2009 - International Conference on e-Business, Proceedings
Number of pages7
PublisherScience and Technology Publications, Lda (SciTePress)
Publication date01.01.2009
ISBN (Print)978-989674006-1
Publication statusPublished - 01.01.2009
EventInternational Conference on E-Business - 2009 - Milano, Italy
Duration: 07.07.200910.07.2009

    Research areas

  • Business informatics - Curve, Demand, Electronic commerce, Non-interactive prices, Posted prices, Price dispersion, Price optimization, Price tests, Pricing strategy