Dynamic Pricing and eBay Today
Dynamic pricing is a pricing technique virtually as old as commerce, not just virtual commerce! It takes its name as a form of responsive pricing, based upon demonstrated and immediately accessible consumer demand. In dynamic pricing, prices can skyrocket or plummet with depending on the demand and consumers willingness to tolerate certain pricing levels pricing. Its oldest manifestation is of course the horse auction at the country fair, but today, "auction-based pricing" referred to as "dynamic" or "fluid" pricing, can be set in contrast to static pricing mechanisms evident in such online organizations as eBay on the World Wide Web.
Today, "nowhere perhaps is the impact of the web more evident than in the case of auctions. By now everyone has heard of eBay," the Internet company credited with pioneering the use of dynamic pricing to its maximum value in the digital age. Auctions in general use the dynamic market mechanism to solve a difficult business problem: pricing in a competitive market. Setting prices can be tricky, as product managers well know, especially when it comes to new product releases. Price the product too high and inventories mount; under price what the market is willing to pay and shortages occur and money is left on the table. Finding the right balance can take time, and indeed, one can continue to miss the mark as the market shifts and competition evolves. With an auction, there is no guesswork: the market sets the price, usually above some set minimum that can be tolerated by the seller. The most commonly used auction forms are the open-cry or English auction used on eBay, the sealed bid auction, and the Chinese auction. However, there are a number of dimensions that can be varied in an auction to yield subtle but important differences in the process and outcome. (Rappa, 2005)
On eBay, which deploys the open-cry or English auction but in digital form, users are aware of the identity and the bid of their competitors, and are thus urged to bid higher. In the sealed bid format, which is not usually practiced online, one does not know the bids of one's competitors. Although theoretically one should keep one's bidding…
Sample Source(s) Used
Works Cited
Perloff, J.M. (2004). Microeconomics. 3rd Edition. New York City, NY: Pearson Addison Wesley.
Rappa, Michael. (13 May 2005) "Auctions and Dynamic Pricing." The Digital Enterprise. Retrieved 18 Jul 2005 at http://digitalenterprise.org/auctions/auctions.html
Related Documents
Study Document
Ebay Global Strategy Analysis Case
Thesis eBay can continue to experience economic growth in services if the company successfully manages to transform the insights gained from their data marts and base of intelligence into marketable services. Hypothesis Investing in R&D to continually grow the areas of reputation management and trust-based verification services will make a significant contribution to long-term value as these are areas all e-commerce strategies require. I. Progression of eBay Value Chain from the Physical to the
Study Document
Dynamic Pricing According to Rincon,
) to engage in online price discrimination (Ramasastry, 2005). For instance, Amazon has used dynamic price to offer discounts to customers comparing prices on a bargain hunter Web site and to offer special prices to first-time customers (Ramasastry, 2005). To date, online price discrimination based on information about individual customers has been limited primarily by consumer resistance to this practice. A University of Pennsylvania survey revealed that eighty-seven percent of
Study Document
Agree With Google and Microsoft
eBay needs to attack this issue of trust head-on first and make the most of turning around their reputation for accuracy, reliability of transactions, transparency and vetting of buyers and sellers if they are to preserve their reputation. When all of these factors are taken into account, including the lack of platform focus, the purchase and resale of Skype, the lack of focus on being an exchange over a platform
Study Document
Amazon.com a Strategic Assessment of Amazons' E-Strategies
Amazon.com A Strategic Assessment of Amazons' e-Strategies Amazon's remarkable ascent as one of the top online global retailers can be attributed to the foresight they had in creating a comprehensive distributed order management, Enterprise Resource Planning (ERP), Supply Chain Management (SCM) and e-commerce series of systems. The many other e-commerce sites that rose quickly with massive infusions of venture capital just as quick exited the market, flaming out due to a lack
Study Document
Promising Phenomenon That Lends Itself
66).
Furthermore, social software will only increase in importance in helping organizations maintain and manage their domains of knowledge and information. When networks are enabled and flourish, their value to all users and to the organization increases as well. That increase in value is typically nonlinear, where some additions yield more than proportionate values to the organization (McCluskey and Korobow, 2009). Some of the key characteristics of social
Study Document
Cross Platform Mobile and Web
82). Both desktop and Web widgets have the same basic components. Fundamentally, they use Web compatible formats, even if intended to run in a desktop environment. This means that the core of the widget is HTML and CSS code which contains the actual content of the widget, namely text, linked images/video or content pulled from a server of Web service. Alternatively, the widget content can be created using Flash, although