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

Author

Listed:
  • Mark Bergen

    (University of Minnesota)

  • Mark Ritson

    (London Business School)

  • Shantanu Dutta

    (University of Sourthern California)

  • Daniel Levy

    (Bar-Ilan University)

  • 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 & Mark Ritson & Shantanu Dutta & Daniel Levy & Mark Zbaracki, 2005. "Shattering the Myth of Costless Price Changes: Emerging Perspectives on Dynamic Pricing," Others 0505006, University Library of Munich, Germany.
  • Handle: RePEc:wpa:wuwpot:0505006
    Note: Type of Document - pdf; pages: 22
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/othr/papers/0505/0505006.pdf
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    Keywords

    Menu Cost; Myth; Costly Price Change; Cost of Price Adjustment; Dynamic Pricing; Customer Cost of Price Adjustment; Organizational Cost of Price Adjustment; Managerial Cost of Price Adjustment; Supply Chain; Investment in Pricing Processes; Price Change Tactic; Price Change Strategy; Pricing Tactics; Pricing Strategy; Pricing Effectiveness;

    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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