BIG · Pricing with Big Data

Pricing with Big Data

This EU project studied the following five areas: (a) novel pricing strategies in online marketplaces, in particular groceries and retail; (b) barriers, frictions, moderators of price dispersion in the online and the offline channels; (c) consumers’ reactions to price formats, price cues, and dynamic price changes; (d) stores and consumers reactions to external shocks; and (e) methodological tools to analyze empirical big datasets. These areas were addressed through four research papers. Pricing in Online Groceries: This paper studied price dispersion in online and offline groceries. The study reports substantial price dispersion in three dimensions (across time, across sellers, and across locations), compared to offline supermarkets. An important implication of the study is that the usage of algorithms (automation of pricing decisions) in the online channel amplify price discrimination. Algorithms do so at those three dimensions. Resilience of Retail Stores to External Shocks: This research project studied how fashion retail stores (supply-side) and shoppers (demand-side) are affected by an external shock. The COVID-19 is used as an external shock. Empirically, high-frequency inventory records were collected online for thousands of stores from twenty countries to construct a measure of offline sales for each store. The study reports heterogeneity across stores and sheds light on the store features that explain heterogeneity. For example, proximity to touristic attractions, large stores, locations inside shopping malls, amplify the adverse effect of the COVID-19. Moreover, informs policymakers about the timing and locations of stores that are most poorly performing and, therefore, might require more immediate reactivation packages. Price Presentation and Shoppers’ Behavior: This research project studies how consumers react to price formats and the sequential timing of the price presentation. For example, when the price discovery is pushed to later stages of the funnel, that delay modifies’ customers perception of the price distribution and the price salience attribute in the decision-making process, and therefore can increase or decrease the probability of making a transaction. This research is embedded in a recent body of literature studying boundedly rational consumers and their interaction with price “frames”. Dynamic Prices in Restaurants: This project studies dynamic discounts in restaurants in the context of an online marketplace that brings together restaurants and customers. It shows how consumers can strategically redeem discounts across restaurants, and how restaurants strategically decide those discounts to incorporate competitive and demand effects. This research is important managerially, because it sheds light on the business’ strategy, but also more broadly, because the restaurant is an industry characterized by many frictions (e.g., “menu costs”). Therefore, advances to reduce frictions can significantly enhance the restaurant industry going forward.

Текст от CORDIS, на английски · Данни: CORDIS, © Европейски съюз