UKNM: Dynamic price elasticity model

[John McCarthy]

> Has anyone ever discovered/used/invented a way of modelling the

> relationship between price and demand in a real-time environment? What

> I'm struggling with is a way of modelling the impact on sales of

> adjusting prices to meet demand in a web community (like an auction site

> or buying club).


The relationship between demand and price can simply drawn on a graph.

The shape of that graph depends on the product.

Some products have elestic demand characteristics - some inelastic.


All that modelling will do is formalise an equation that reproduces the

shape of the graph.

It sounds to me as though you need to know the shape of the graph first.

For this you need an emprical approach - ie. change prices and then see what

affect this has on demand

(accounting for underlying traffic rates). You will then be able to build an

idea of the graph shape.

This will serve you far better than any modelling exercise and will be

grounded in reality.


Dr. John

Attention Solutions



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