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Subject: Re: UKNM: Dynamic price elasticity model
From: Sean Phelan
Date: Mon, 20 Mar 2000 07:45:14 GMT

>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).
>Nick Young

Have you read Hal Varian's book? Actually Hal Varian and Carl Shapiro's
"Information Rules" - see its web site at http://www.inforules.com/

Here at Multimap.com we gave serious thought to dynamic pricing. We would
like to find some way of giving discounts or otherwise "encouraging" partner
sites that cater to recreational web users, as they have their main activity
during the evenings and at weekends. We have to over-build capacity to meet
the needs of 9-6, Monday to Friday business users and also allow for the
potentially large traffic hikes that result from mainstream press coverage.
So we would like to fill that capacity much more during slack times.

We considered a few dynamic models, proposed by Hal Varian and others, but
in the end decided against them. The problem is that most of the people
that send us enquiries about our pricing don't want to tell us very much
about their application. They expect a single, simple price list. If we
reply saying "the price depends on what you are going to do; please tell us
how you want to use the maps", they get suspicious and usually never reply.
Young entrepreneurs, especially, are worried that there are bad people out
there who want to steal their unique and brilliant idea (there aren't, but
that is beside the point).

We also considered Hal Varian's approach of measuring price elasticity by
sending out, say, five different versions of the price list, more-or-less
at random, and measuring the relative uptake of each. We rejected this,
because entrepreneurs, web site developers, etc. exchange information,
and may be aggrieved or even insulted to find that different people get
offered different prices. Economists and statisticians would find it an
interesting idea; impoverished entrepreneurs may just get pissed off.


Sean Phelan seanatmultimap [dot] com http://www.multimap.com
phone (within UK): 0171 433 0460 fax (UK): 0171 209 5194
phone (Int'l): +44 171 433 0460 fax: +44 171 209 5194

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  Re: UKNM: Dynamic price elasticity model, Nick Young

  UKNM: Dynamic price elasticity model, Nick Young

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