ajaz_eco_204_2012_2013_chapter_16_Market_Power

For example amazon continuously changes ever so

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Unformatted text preview: _______ ______ By the same token suppose: This says that the current price is too low relative to current demand conditions (encompassed by ) and variable cost conditions (encompassed by ); the company should raise price. Observe that as the price increases, consumers become more price elastic which lowers the right hand side of the equation until eventually the equation balances at the optimal price. In sum: Of course, the company knows its price and It can change the price slightly and compute Elasticity by Arc Suppose that currently: [ [ Or Recommendation: lower Or Recommendation: raise method [ Or Recommendation: maintain Example: Amazon’s Dynamic Pricing, Priceline Dynamic Pricing While this algorithm doesn’t yield the optimal price per se it does move price in the right direction and is certainly better than the status quo. Since this algorithm relies on continuously computing price elasticity and price adjustments, it should not be surprising that internet retailers, “E-tailers” deploy such pricing techniques. For example, Amazon continuously changes...
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This document was uploaded on 01/19/2014.

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