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Shattering the Myth of Costless Price Changes: Emerging Perspectives on Dynamic Pricing

Author

Listed:
  • Mark Bergen

    (University of Minnesota)

  • Shantanu Dutta

    (University of Southern California)

  • Daniel Levy

    () (Bar-Ilan University and Emory University)

  • Mark Ritson

    (London Business School)

  • Mark Zbaracki

    (University of Pennsylvania)

Abstract

In this paper we argue that pricing is all about price changes, and that the costs of price changes are often simultaneously subtle and substantial. We discuss a framework to deal with the dynamics of changing prices. This framework incorporates customer interpretations of price changes, an awareness of the organizational costs of price changes, investments in future pricing processes, and an understanding of the role that supply chains play in price change strategy. The framework can be used at the tactical level to improve the specific price changes chosen and made, at the managerial level to decide whether or not to make a particular price change at all, and at the strategic level to determine what price adjustment processes should be invested in to improve pricing effectiveness in the future.

Suggested Citation

  • Mark Bergen & Shantanu Dutta & Daniel Levy & Mark Ritson & Mark Zbaracki, 2003. "Shattering the Myth of Costless Price Changes: Emerging Perspectives on Dynamic Pricing," Working Papers 2003-09, Bar-Ilan University, Department of Economics.
  • Handle: RePEc:biu:wpaper:2003-09
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    File URL: http://www.biu.ac.il/soc/ec/wp/9-03/9-03.pdf
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    Keywords

    Pricing; price setting; price adjustment; cost of price adjustment; price change management; investment in pricing processes; supply chains; customer costs of price adjustment;

    JEL classification:

    • M31 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Marketing
    • M10 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - General
    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L16 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Industrial Organization and Macroeconomics; Macroeconomic Industrial Structure
    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General
    • D20 - Microeconomics - - Production and Organizations - - - General

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