Evaluating pricing strategy using e-commerce data: evidence and estimation challenges

DOI10.1214/088342306000000187MaRDI QIDQ2381770zbMATH OpenOpenAlexFDO

Authors Anindya Ghose, Arun Sundararajan

Publication date 18 September 2007

Published in Statistical Science (Search for Journal in Brave)

Full work available at URL https://arxiv.org/abs/math/0609170, https://projecteuclid.org/euclid.ss/1154979816

zbMATH Keywords

electronic commerceprice discriminationpricing strategyquality differentiationsales rankversioning

Mathematics Subject Classification ID

Applications of statistics to economics (62P20) Microeconomic theory (price theory and economic markets) (91B24)

Abstract: As Internet-based commerce becomes increasingly widespread, large data sets about the demand for and pricing of a wide variety of products become available. These present exciting new opportunities for empirical economic and business research, but also raise new statistical issues and challenges. In this article, we summarize research that aims to assess the optimality of price discrimination in the software industry using a large e-commerce panel data set gathered from Amazon.com. We describe the key parameters that relate to demand and cost that must be reliably estimated to accomplish this research successfully, and we outline our approach to estimating these parameters. This includes a method for ``reverse engineering actual demand levels from the sales ranks reported by Amazon, and approaches to estimating demand elasticity, variable costs and the optimality of pricing choices directly from publicly available e-commerce data. Our analysis raises many new challenges to the reliable statistical analysis of e-commerce data and we conclude with a brief summary of some salient ones.

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Cites work

• Bundling information goods: pricing, profits, and efficiency
• Econometric analysis of cross section and panel data.
• Functional data analysis in electronic commerce research
• Microeconomic theory
• Nonlinear pricing of information goods

Cited in

(4)

• Providing data insights to suppliers for product development: incentive analysis of an e-tailer
• Moving from data-constrained to data-enabled research: experiences and challenges in collecting, validating and analyzing large-scale e-commerce data
• Data mining in electronic commerce
• Do We Exploit all Information for Counterfactual Analysis? Benefits of Factor Models and Idiosyncratic Correction

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