ajaz_eco_204_2012_2013_chapter_16_Market_Power

Ajaz_eco_204_2012_2013_chapter_16_Market_Power

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Unformatted text preview: while electronics retailer Newegg in the morning raised its price to $600 from $500. Amazon, Best Buy and Newegg declined to comment. The most frequent price adjustments are occurring among Web stores selling products on Amazon, which encourages ruthless competition between retailers vying for the top spot among search results. Before software, stores would send employees to their competitors' stores to jot down prices by hand, said Rafi Mohammed, founder of Culture of Profit, a Cambridge, Mass., consulting firm that helps retailers with their pricing strategies. Once e-commerce took off, companies scanned their competitors' websites to make adjustments, he said. The new software has greatly speeded up the process. Online home goods retailer Wayfair changes hundreds of thousands of prices daily, said CEO Niraj Shah. When it finds pricing discrepancies —like if a product is priced 5% higher than a competitor—the company quickly makes adjustments. The pricing works both ways. If Wayfair finds that it is selling a product for much less than its competition, it can then ra ise the price to be more in line with the market's pricing, said Mr. Shah. "In the age of the Internet, fixed prices are a thing of the past," said Oren Etzioni, professor of computer science at the University of Washington and co-founder and chief technologist at Decide.com. 9.7 Optimal Price and...
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This document was uploaded on 01/19/2014.

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