An Empirical Study of Pricing Strategies in an Online Market with High-Frequency Price Information

49 Pages Posted: 11 Aug 2011 Last revised: 13 Jun 2014

See all articles by Sara Fisher Ellison

Sara Fisher Ellison

Massachusetts Institute of Technology (MIT) - Department of Economics

Christopher M. Snyder

Dartmouth College - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: July 12, 2011

Abstract

We study competition among a score of firms participating in an online market for a commodity-type memory module. Firms were able to adjust prices continuously; prices determined how the firms were ranked and listed (lowest price listed first), with better ranks contributing to firms’ sales. Using a year’s worth of hourly data, we document the pricing dynamics, cycles, and other patterns in this market. We then characterize empirically the factors which drive price changes, noting clear evidence of firm heterogeneity in the choice of pricing strategy. Finally, we develop a framework for simulating counterfactual market settings, using the simulations to examine counterfactuals involving different mixes of firms according to pricing strategies.

Keywords: Ecommerce, Pricing, Strategy, Repeated Games

JEL Classification: L11, C73, D21, L81

Suggested Citation

Fisher Ellison, Sara and Snyder, Christopher M., An Empirical Study of Pricing Strategies in an Online Market with High-Frequency Price Information (July 12, 2011). MIT Department of Economics Working Paper No. 11-13, Available at SSRN: https://ssrn.com/abstract=1907937 or http://dx.doi.org/10.2139/ssrn.1907937

Sara Fisher Ellison (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

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Christopher M. Snyder

Dartmouth College - Department of Economics ( email )

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(603) 646-2122 (Fax)

HOME PAGE: http://www.dartmouth.edu/~csnyder/

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