Dynamic Pricing: should your fear it or not?

12

October

2016

5/5 (1)

E-commerce is growing, and the role of information strategy is becoming more widely appreciated. Even non-technical savvy consumers and industries experience new technologies and applications every day, and have been forced to cope with it. Technology is changing the world, and we expect much more to come.

Whereas some developments are accepted by the wider public without any hurdles, others face more resistance. Among the latter you will find dynamic pricing. Being a form of (price) discrimination, it is inextricably tied to ethical debates. This blog will give you some insights to see if you should be scared of it, or not.

A quick recap, what exactly is dynamic pricing again? Most simply put, it is about charging different prices for the same products. More eloquently said, its purpose is to capture consumer surplus (you know, what you were willing to pay in excess of what you actually did) and hence maximise revenue (Shpanya, 2014). Certain degrees of price discrimination specify the extent to which this can be done. This blog will focus on third degree price discrimination. This entails that the same product can be sold to several buyer segments at different at different prices. One forms a group of buyers with a shared price preference (say students), and charge them a lower price for the same products that other segments (i.e. non-students) would be offered.

One of the nifty tricks of the almighty technological advances again? Not really! Price discrimination is probably as old as commerce is, and can be traced back to ancient trade in Middle East bazaars (Knowledge@Wharton, 2005). What the internet did accelerate is the extent to which it can be executed real-time. Prices can thus, in general, be put more closely to your willingness to buy. Although you may less frequently catch a no-brainer discount, it will also enable overpriced products to average out to what you may consider to be fair. Moreover, it may incentivize sellers to compete on price, hence even erode prices (Knowledge@Wharton, 2005). In conclusion, you’ll probably ‘win’ sometimes, and you’ll probably ‘lose’ sometimes.

Then why do many people feel upset about it? The answer lies in the transparency of price setting. Online, customer often don’t know they pay a different price as it occurs. But the fact that it happens, and people are increasingly more aware of that, dissatisfies them. This makes dynamic pricing more about consumer behaviour than about rigid economics. It will be interesting to see how big data, as a means to capture and measure human behaviour, will add to this (psychological) equation. What do you think about this? Feel free to leave your opinion down below!

Shpanya, A. (2014), What is price discrimination and is it ethical? (Online), Available at: https://econsultancy.com/blog/64068-what-is-price-discrimination-and-is-it-ethical/ (Accessed 12 October 2016)

Knowledge@Wharton (2005), What Consumers — and Retailers — Should Know about Dynamic Pricing (Online), Available at: http://knowledge.wharton.upenn.edu/article/what-consumers-and-retailers-should-know-about-dynamic-pricing/ (Accessed 12 October 2016)

Please rate this

TOTW – Electronic Markets and Auctions: Fiverr vs. Amazon Mechanical Turk (group 80)

4

October

2016

No ratings yet.

For this week’s TOTW project we will take a closer look at  electronic markets and auctions. We decided to analyse Fiverr and Amazon Mechanical Turk, two e-service platforms. In this blog post, a summary of our video (https://www.youtube.com/watch?v=ZQMS7XE_Iu4) and research will be provided. If you haven’t watched our video yet, here are the main takeaways.

 

Fiverr

Fiverr is an online marketplace found in 2009 by Shai Wininger and Micha Kaufman, coined as “eBay for the service economy” by the latter. The website facilitates the supply and demand of any kind of micro-service, or ‘Gig’. A Gig can be a professional service such as market research or web design, but can also be as simple as a video of a person singing you a birthday song. Users are able to find freelancers who provide any skill, talent or resource in exchange for a fee starting at $5. Any upgrades in terms of service level or volume allows suppliers to exceed this base price if desired (Wauters, 2012). Over the past five years, 4.2 million Gigs were created (Fiver, 2016).

 

SWOT – Fiverr

Strengths Weaknesses
  • Created a new category within E-commerce called micro services.
  • Created strong barriers to market entry and have experienced business units
  • High degree of automation. Limited control for sellers which distorts  the peer-to-peer rating review system
  • Loss of control in decision making process due to extensive VC funding
Opportunities Threats
  • A steady increase in demand due to a growing E-commerce market.
  • Increased internet access in developing countries.
  • Increased competition is likely to lower prices and decrease  profitability
  • Imbalance ratio between buyers and sellers

 

Amazon Mechanical Turk

Amazon Mechanical Turk (AMT) is an online crowdsourcing market place, launched in 2005 under Amazon Web Services. The website facilitates ‘workers’ and ‘requesters’ of HITs, short for Human Intelligence Tasks. These tasks should be (practically) unable to be performed by computers, and can hence only be outsourced to humans. Examples of this are categorizing images, cleaning databases and filling out surveys. Workers are free to browse and accept any type of job, in return for a pre-set fee by the requester upon successful completion (Amazon MTurk, 2016). As a result, many of the tasks available are relatively simple and repetitive and typically earn workers only several cents to complete them. Over 500,000 workers are using AMT in 190 countries (Williamson, 2014).

 

SWOT – AMT

Strengths Weaknesses
  • Tasks are in theory only limited to the boundaries of our imagination
  • Provides a good platform to assign-piece work at very low costs
  • Workers  might provide opinions based on what client wants to hear, abiding to social desirability bias.
  • Workers may add random feedback or skip steps
Opportunities Threats
  • Provides a venue for generating big data easily and testing early stage concepts quickly & inexpensively
  • Rise of Artificial Intelligence. Tasks might be automated and replaced by robots.

 

Please watch our video to find out more, and feel free to leave a comment below!

 

References

Amazon Mturk (2016), Frequently Asked Questions [Online], Available at: https://www.mturk.com/mturk/help?helpPage=overview [Accessed 16 September 2016]


Fiver (2016), Year in Review [Online], at :https://www.fiverr.com/yearinreview/ [Accessed 17 September 2016]


Wauters, R. (2012). ‘Fiverr helps get things done for as little as $5, raises $15m from Accel and Bessemer’ [Online], Available at: http://thenextweb.com/insider/2012/05/03/fiverr-helps-get-things-done-for-as-little-as-5-raises-15m-from-accel-and-bessemer/ [Accessed 17 September 2016]

 

Williamson, V. (2014), ‘On the Ethics of Crowdsourced Research’ [Online], Available at: http://scholar.harvard.edu/files/williamson/files/mturk_ps_081014.pdf [Accessed 17 september 2016]

 

Please rate this

Disinformation Warfare: Russia vs. The West

4

October

2016

No ratings yet.

In this Information Strategy course, we have been learning lots about the use of information for commercial practices. However, an ancient but still very relevant application is the use of information, and increasingly information technologies, for propaganda. Although propaganda may sound more ‘Cold War’ than you may think, it is a very widespread and present day issue. In this blog post I will elaborate on how Russian digital information strategies have affected Western politics and journalism.

Two instances where Russia denied any influence: the downing of flight MH17 and role of Russian commandos in the seizure of Crimea. Both times, the Russian government was very effective in persuading its own civilians of their side of the story, whereas Western media exposed Russian lie after another. How is it possible that such a large group of people is susceptible to stories that do not seem to make any sense to the non-Russian audiences? Although perhaps many reasons add to this complex matter, this blog points at the role of the disinformation warfare that Russia has very effectively been executing.

A multitude of different communications channels were used to deny and discredit Russian interference in both cases. Although lying by governments is not new at all, the use of information technologies is striking in this example. A well-coordinated media campaign including internet trolls, hackers, state-run media channels, retired soldiers, public figures and anonymous hackers (Foreignpolicy.com, 2016) influenced public perception heavily. One of the reasons why they are so persuasive, is the use of online media platforms, such as Twitter and other popular web blogs. Thousands of fake accounts are said to have been used to place comments, steering readers into certain points of view. In addition, self-created evidence, such as supposed radar images, ‘tracked’ phone conversations and hacked ‘e-mails’ of open-sourced journalism platforms such as Bellingcat, was created and spread using internet technologies (Foreignpolicy.com, 2016).

As it is very complex and costly to distinguish and remove fake accounts from social webspaces such as Twitter, it has become a new agenda point for NATO forces (Voice of America News, 2016). And whereas the Russian government does not seem to play by the rules, Western agencies are far more restricted in using their powers. Does the freedom of the internet in this example restrict the course of justice in several countries?

References:

Foreignpolicy.com (2016) http://foreignpolicy.com/2016/09/29/how-mh17-gave-birth-to-the-modern-russian-spin-machine-putin-ukraine/

Voice of America News (2016) http://www.voanews.com/a/nato-russia-information-war-propaganda/3526780.html

Please rate this