Price Dispersion With The Meteoric Term Paper

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That's because consumers are spending less time, becoming more efficient if you will, on pricing comparisons. Yet as more sites become known and pricing dispersion begins to take hold on specific goods, online retailers are also becoming more adept at analyzing who is visiting, purchasing from, and shopping their websites on pricing alone. The counterbalancing effect of online retailers gaining greater expertise in analyzing and marketing to their customers leads to greater pricing execution, pricing enforcement, and pricing optimization throughout their customer bases served online. Pricing execution occurs when a shopper for a specific product, who has price-shopped the site before, gets a % off coupon on the pop-up window or any other form of incentive. Pricing enforcement also has a specific effect on price dispersion in that it inhibits retailers who are part of a broader retailing group to deviate from pricing standards. Finally, pricing optimization predominantly occurs in the services industries including airlines, where a product,...

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Expedia.com uses price optimization for example for all airlines and offerings.
The net effect of pricing execution, enforcement, and optimization on price dispersion is counter to the hypothesis that the Internet would tend to normalize and disperse price. Yet in fact the opposite is true, as search costs plummet and retailers learn more about how to tailor pricing in real-time to the characteristics of online customers, price dispersion is curtailed and differentiation through actual or perceived value of retailers and their ability to invoke pricing strategies is increased.

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References

Brynjolsson, E. And M. Smith. 2000. "Frictionless Commerce? A Comparison of Internet and Conventional Retailers." Management Science, 46(4): 563-585.

Clemons, E., I. Hann, and L. Hitt. 2002. "The Nature of Competition in Electronic Markets: An Empirical Investigation of Online Travel Agent Offerings." Management Science, 48(4): 534-549.


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